Local versus global factors weighing on stock market returns during the COVID-19 pandemic

Catalin Dragomirescu-Gaina and Dionisis Philippas

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: We use stock market returns and a new, weekly available, GDP tracker to estimate a structural VAR identified with long-run restrictions. We find that global ‘news’ contribute more than local ‘news’ shocks to explaining the recent variance of equity returns from developing and small developed countries. Since data do not (yet) point to an increase in financial integration during the current pandemic, our investigations support the alternative that these markets hold too optimistic views on their prospects and future ties with the global economy.

Keywords: Structural VAR; ‘news’ shocks; Financial integration (search for similar items in EconPapers)
JEL-codes: C32 F30 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003123

DOI: 10.1016/j.frl.2021.102270

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