Examining the Dynamic Asset Market Linkages under the COVID-19 Global Pandemic

Akihiko Noda

Economics Bulletin, 2022, vol. 42, issue 2, 653 - 661

Abstract: This study examines dynamic asset market linkages during the global COVID-19 pandemic based on market efficiency in the sense of Fama (1970). In particular, we estimate the joint degree of market efficiency by applying a generalized least squares (GLS)-based time-varying autoregressive (TV-VAR) model of Ito et al. (2014, 2017). The results show that (1) the joint degree of market efficiency changes widely over time, consistent with the adaptive market hypothesis of Lo's (2004), (2) the global COVID-19 pandemic may have eliminated arbitrage and improved market efficiency through enhanced linkages among asset markets, and (3) market efficiency has continued to decline due to the Bitcoin bubble that emerged at the end of 2020.

Keywords: COVID-19; Asset Market Linkages; Adaptive Market Hypothesis; Efficient Market Hypothesis; GLS-Based Time-Varying Model Approach. (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2022-06-30
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Working Paper: Examining the Dynamic Asset Market Linkages under the COVID-19 Global Pandemic (2021)
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