Infectious disease pandemic and permanent volatility of international stock markets: A long-term perspective

Lan Bai, Yu Wei, Guiwu Wei, Xiafei Li and Songyun Zhang

Finance Research Letters, 2021, vol. 40, issue C

Abstract: Understanding the impact of infectious disease pandemic on stock market volatility is of great concerns for investors and policy makers, especially during recent new coronavirus spreading period. Using an extended GARCH-MIDAS model and a newly developed Infectious Disease Equity Market Volatility Tracker (EMV-ID), we investigate the effects of infectious disease pandemic on volatility of US, China, UK and Japan stock markets through January 2005 to April 2020. The empirical results show that, up to 24-month lag, infectious disease pandemic has significant positive impacts on the permanent volatility of international stock markets, even after controlling the influences of past realized volatility, global economic policy uncertainty and the volatility leverage effect. At different lags of eruptions in infectious disease pandemic, EMV-ID has distinct effects on various stock markets while it has the smallest impact on permanent volatility of China's stock market.

Keywords: Infectious disease pandemic; COVID-19; Stock market volatility; Garch-midas (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612320308266
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320308266

DOI: 10.1016/j.frl.2020.101709

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().