Effects of the COVID-19 pandemic on the US stock market and uncertainty: A comparative assessment between the first and second waves

Mohamed Yousfi, Younes Ben Zaied, Nidhaleddine Ben Cheikh (), Béchir Ben Lahouel and Houssem Bouzgarrou

Technological Forecasting and Social Change, 2021, vol. 167, issue C

Abstract: This paper makes the first comparative assessment of the impacts of the first and second waves of the ongoing COVID-19 pandemic for the US stock market and its uncertainty. To this end, we investigate the dynamic conditional correlation and the asymmetric impacts of shocks on the correlation between the US and Chinese stock markets before and during the COVID-19 crisis. Furthermore, we analyze and compare the relationship between the COVID-19 pandemic and US returns and uncertainty during the first and second waves of the pandemic. First, we find that the dynamic correlation approach supports the presence of volatility spillovers (contagion effects) between the two stock markets, especially during the rapid spread phase of COVID-19 in the US. Second, the analysis of news impact correlation surfaces shows that the shocks to the US and Chinese markets have asymmetric effects on the correlation between the two markets. Finally, we find a persistent link between US returns, uncertainty, and the COVID-19 pandemic during the first and second waves of the outbreak. Our results prove that the pandemic has shown harmful consequences for financial markets in general and the US economy in particular.

Keywords: COVID-19 pandemic; Comparative assessment; First wave; Second wave; US stock market; Economic uncertainty (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:167:y:2021:i:c:s0040162521001426

DOI: 10.1016/j.techfore.2021.120710

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