The Interactions between COVID-19 Cases in the USA, the VIX Index and Major Stock Markets

Simon Grima, Letife Özdemir, Ercan Özen and Inna Romānova
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Simon Grima: Department of Insurance, Faculty of Economics, Management and Accountancy, University of Malta, MSD 2080 Msida, Malta
Letife Özdemir: Department of Logistics Management, School of Applied Sciences, University of Afyonkocatepe, Afyonkarahisar 03200, Turkey
Ercan Özen: Department of Finance and Banking, Faculty of Applied Sciences, University of Usak, Uşak 64200, Turkey
Inna Romānova: Faculty of Business, Management and Economics, University of Latvia, LV-1586 Riga, Latvia

IJFS, 2021, vol. 9, issue 2, 1-19

Abstract: With this study, we aimed to determine (1) the effect of the daily new cases and deaths due to the COVID-19 pandemic in the United States on the CBOE volatility index (VIX index) and (2) the effect of the VIX index on the major stock markets during the early stage of the pandemic period. To do this, we collected and analysed the daily new cases and death numbers during the COVID-19 pandemic period in the United States and the country indexes of the USA (DJI), Germany (DAX), France (CAC40), England (FTSE100), Italy (MIB), China (SSEC) and Japan (Nikkei225) to determine the impact of the VIX index on the major stock markets. We then subjected this data to the Johansen co-integration test and the fully modified least-squares (FMOLS) method. The results indicated that there was co-integration between the VIX and the COVID-19 pandemic and that there was co-integration between the VIX index and major indexes, except for the CAC 40 and MIB. Moreover, the results showed that the new COVID-19 cases in the USA had a higher impact on the VIX than cases of deaths during the same period.

Keywords: COVID-19 pandemic; fear index; co-integration test; fully modified least squares method; stock markets (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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