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How do stock price indices absorb the COVID-19 pandemic shocks?

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  • Zhang, Xu
  • Ding, Zhijing
  • Hang, Jianqin
  • He, Qizhi

Abstract

To assess the resiliency of stock price indices during the COVID-19 crisis, this study provides a distinctive perspective; that is, we evaluate the ability of stock price indices to absorb COVID-19 shocks. We construct the measures of absorptive intensity and duration to identify a stock price’s absorptive capacity. We then employ the Granger causality test and a topology network approach to investigate the interactions of absorptivity among stock price indices. Our results show that stock price absorptivity varies over time and across countries and industries. The US and the Brazil stock indices have relatively high absorptive intensity while short duration. The health care industry shows distinctive trend in absorptive intensity from the other industries. The intensity of the non-cyclical industries such as utilities and consumer staples is high, while the cyclical industries such as banking, real estate, and energy have lower absorptive intensity. Moreover, the utilities, consumer staples, and financials industries are the main resiliency transmitters.

Suggested Citation

  • Zhang, Xu & Ding, Zhijing & Hang, Jianqin & He, Qizhi, 2022. "How do stock price indices absorb the COVID-19 pandemic shocks?," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:ecofin:v:60:y:2022:i:c:s1062940822000286
    DOI: 10.1016/j.najef.2022.101672
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    More about this item

    Keywords

    COVID-19 pandemic; Stock price indices; Absorptive intensity; Absorptive duration; Spillover network;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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