The effect of COVID-19 vaccine on the international financial markets

Yunsheng Ma and Jiaying Wang

Finance Research Letters, 2025, vol. 71, issue C

Abstract: Existing studies on the COVID-19 pandemic and vaccine development have primarily focused on national stock markets, with limited attention to international financial markets. This paper constructs a news-based index to measure public sentiment regarding the progress of COVID-19 vaccine development during the first year of the outbreak and examines its impact on international financial markets. We find that positive vaccine development sentiment decreases the CBOE Volatility Index (VIX) while boosting capital inflows and currency appreciation in emerging markets, as vaccine development leads to a greater reduction in public expectations of future risk in these markets. It also lowers the unit price of risk in the context of carry trade risk premiums, as favorable developments reduce expected future economic uncertainty.

Keywords: COVID-19; Country’s risk; Consumption growth risk; Risk appetite; Carry trade; Natural language processing (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014193

DOI: 10.1016/j.frl.2024.106390

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