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COVID‐19 Infections and the Performance of the Stock Market: An Empirical Analysis for Australia

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  • Markus Brueckner
  • Joaquin Vespignani

Abstract

Using daily data, we estimate a vector autoregression model to characterise the dynamic relationship between COVID‐19 infections in Australia and the performance of the Australian stock market, specifically the ASX‐200. Impulse response functions show that COVID‐19 infections in Australia have a significant positive effect on the performance of the stock market: a one standard deviation increase in new registered cases of COVID‐19 infections in Australia increases the daily growth rate of the ASX‐200 by around half a percentage point. This result is robust to alternative lag selections of the VAR model as suggested by alternative information criteria, including in the model control variables for stock market volatility, that is the ASX‐200 VIX; the USD‐AUD exchange rate and the international oil price; news by the World Health Organization regarding a COVID‐19 pandemic and public health emergency; and the government‐imposed shutdown of parts of the Australian economy. We also present estimates of the dynamic relationship between the daily growth rate of the Dow Jones and daily new cases of COVID‐19 infections in the United States. The US data show, similar to the Australian data, that there is a significant positive effect of COVID‐19 infections on the performance of the stock market.

Suggested Citation

  • Markus Brueckner & Joaquin Vespignani, 2021. "COVID‐19 Infections and the Performance of the Stock Market: An Empirical Analysis for Australia," Economic Papers, The Economic Society of Australia, vol. 40(3), pages 173-193, September.
    • Handle: RePEc:bla:econpa:v:40:y:2021:i:3:p:173-193
    DOI: 10.1111/1759-3441.12318
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    Cited by:

    1. Kamal, Javed Bin & Wohar, Mark, 2023. "Heterogenous responses of stock markets to covid related news and sentiments: Evidence from the 1st year of pandemic," International Economics, Elsevier, vol. 173(C), pages 68-85.
    2. Greta Keliuotyte-Staniuleniene & Julius Kviklis, 2021. "Stock Market Reactions during Different Phases of the COVID-19 Pandemic: Cases of Italy and Spain," Economies, MDPI, vol. 10(1), pages 1-32, December.
    3. Swarnil Roy & Sk. Riad Arefin & Avijit Mallik, 2023. "How Volatility and Herding of the Stock Markets in the Oceania Region Influence Investors and Policymakers: A Sector-Wise Exploration in Pre and Post-COVID Period," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(1), pages 1-24, January.
    4. Samet Gunay & Walid Bakry & Somar Al-Mohamad, 2021. "The Australian Stock Market’s Reaction to the First Wave of the COVID-19 Pandemic and Black Summer Bushfires: A Sectoral Analysis," JRFM, MDPI, vol. 14(4), pages 1-19, April.
    5. Ștefan Cristian Gherghina & Daniel Ștefan Armeanu & Camelia Cătălina Joldeș, 2021. "COVID-19 Pandemic and Romanian Stock Market Volatility: A GARCH Approach," JRFM, MDPI, vol. 14(8), pages 1-29, July.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • I00 - Health, Education, and Welfare - - General - - - General

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