A vaccine for volatility? An empirical analysis of global stock markets and the impact of the COVID-19 vaccine

Niall O'Donnell, Darren Shannon and Barry Sheehan

The Journal of Economic Asymmetries, 2023, vol. 28, issue C

Abstract: The oscillation of COVID-19 growth has had a sustaining impact on financial markets. This study investigates the asymmetric impact of COVID-19 growth and recovery on financial markets. Examining ten epicenters of the virus from 01/01/2021 to 31/12/2021, we utilize a stepwise regression methodology and a diverse set of control variables. Controlling for volatility, credit risk, liquidity risk, monetary policy, gold, and oil, our findings indicate a significant impact of COVID-19 on equity indices. Vaccination growth correlates with positive price movements in the USA, UK, China, Japan, France, and Spain. Simultaneously, negative price trends align with virus growth in the USA, UK, China, Japan, Spain, and World models. A nexus of causality between COVID-19, global oil markets, and equity prices is identified, while credit and liquidity risks emerged as significant risk factors in China. Our results highlight the pertinence of swift vaccine developments, lockdown interventions, and central bank responses, providing valuable insights to governments, regulators, and all financial market stakeholders.

Keywords: COVID-19; Vaccines; Equity index prices; Financial markets; Volatility; Monetary policy; Investor sentiment (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:28:y:2023:i:c:s1703494923000439

DOI: 10.1016/j.jeca.2023.e00331

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