A difference in COVID-19 impact on bank stocks between Japan and the US

Takashi Kanamura ()
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Takashi Kanamura: Kyoto University

SN Business & Economics, 2023, vol. 3, issue 7, 1-23

Abstract: Abstract We aim to empirically analyze the impact of COVID-19 on Japanese and US bank stocks. The contribution of this study is threefold. First, a simple econometric analysis proposes a regime-switching model of bank stock price returns due to the impact of COVID-19 by incorporating the direct one of the number of COVID-19-infected individuals on the returns. Second, our empirical analyses show that the number of COVID-19 cases does not directly impact Japanese bank stock price returns, and that directly positively impacts the US ones in a high volatility regime. However, they also show that regarding regime probabilities, both stock prices switch to the high volatility regime immediately after the occurrence of COVID-19, indicating the indirect COVID-19 impacts. Finally, we find mean-reversion in stock prices for US banks but not for Japanese banks. It suggests that under the indirect impacts, the effects of COVID-19 on US bank stock price volatility tend to dissipate in the short run and that Japanese bank stocks have a long-lasting influence from COVID-19. Considering the direct and indirect impacts, and the mean-reversions, US bank stock prices may be resilient to COVID-19, but this is not for Japanese bank stock prices.

Keywords: Bank stocks in Japan; Regime-switching volatility; Mean-reversion; COVID-19; Resilience (search for similar items in EconPapers)
JEL-codes: C58 G01 G21 G32 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s43546-023-00485-6

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