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Infected Markets: Novel Coronavirus, Government Interventions, and Stock Return Volatility around the Globe

Adam Zaremba, Renatas Kizys, David Y. Aharon and Ender Demir ()

Finance Research Letters, 2020, vol. 35, issue C

Abstract: Do government interventions aimed at curbing the spread of COVID-19 affect stock market volatility? To answer this question, we explore the stringency of policy responses to the novel coronavirus pandemic in 67 countries around the world. We demonstrate that non-pharmaceutical interventions significantly increase equity market volatility. The effect is independent from the role of the coronavirus pandemic itself and is robust to many considerations. Furthermore, two types of actions that are usually applied chronologically particularly early—information campaigns and public event cancellations—are the major contributors to the growth of volatility.

Keywords: novel coronavirus; COVID-19; stock market volatility; non-pharmaceutical interventions; government policy responses; international financial market; containment and closure (search for similar items in EconPapers)
JEL-codes: G01 G12 G15 G18 H12 H51 I18 Q54 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:35:y:2020:i:c:s1544612320306310

DOI: 10.1016/j.frl.2020.101597

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