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The risk transmission of COVID-19 in the US stock market

Author

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  • Seungho Baek
  • Kwan Yong Lee

Abstract

This paper studies volatility transmission effects between the US stock market and the COVID-19. Using BEKK-multivariate GARCH model, we find the US stock market volatility depends both its own past shocks and past COVID-19 shocks. Further, we find the US stock market volatility is positively affected by the death rate (bad news) while the recovered rate (good news) has a negative impact on the US stock market volatility. In addition, we find there is an asymmetric volatility impact of COVID-19 on the US stock market: the bad news affects the current US stock market much more than the good news. Our fixed effect panel regression results support the volatility spillover effects.

Suggested Citation

  • Seungho Baek & Kwan Yong Lee, 2021. "The risk transmission of COVID-19 in the US stock market," Applied Economics, Taylor & Francis Journals, vol. 53(17), pages 1976-1990, April.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:17:p:1976-1990
    DOI: 10.1080/00036846.2020.1854668
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    Cited by:

    1. Faheem Aslam & Paulo Ferreira & Haider Ali & Ana Ercília José, 2022. "Application of Multifractal Analysis in Estimating the Reaction of Energy Markets to Geopolitical Acts and Threats," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    2. Al-Maadid, Alanoud & Alhazbi, Saleh & Al-Thelaya, Khaled, 2022. "Using machine learning to analyze the impact of coronavirus pandemic news on the stock markets in GCC countries," Research in International Business and Finance, Elsevier, vol. 61(C).
    3. Ma, Feng & Lu, Xinjie & Liu, Jia & Huang, Dengshi, 2022. "Macroeconomic attention and stock market return predictability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    4. Radosław Puka & Bartosz Łamasz & Iwona Skalna & Beata Basiura & Jerzy Duda, 2023. "Knowledge Discovery to Support WTI Crude Oil Price Risk Management," Energies, MDPI, vol. 16(8), pages 1-14, April.
    5. Isabel Carrillo-Hidalgo & Juan Ignacio Pulido-Fernández & José Luis Durán-Román & Jairo Casado-Montilla, 2023. "COVID-19 and tourism sector stock price in Spain: medium-term relationship through dynamic regression models," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-24, December.
    6. Yuandong, Su & Khaskheli, Asadullah & Raza, Syed Ali & Yousufi, Sara Qamar, 2022. "How COVID-19 influences prices of oil and precious metals: Comparison between data extracted from online searching trends and actual events," Resources Policy, Elsevier, vol. 78(C).
    7. Yıldırım, Durmuş Çağrı & Esen, Ömer & Ertuğrul, Hasan Murat, 2022. "Impact of the COVID-19 pandemic on return and risk transmission between oil and precious metals: Evidence from DCC-GARCH model," Resources Policy, Elsevier, vol. 79(C).
    8. Shivani Narayan & Dilip Kumar, 2023. "Systemic Risk Transmission from the United States to Asian Economies During the COVID-19 Period," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 22(1), pages 57-84, March.

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