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Pandemics and Stock Price Volatility: A Sectoral Analysis

Author

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  • Niraj Prasad Koirala

    (Department of Economics and Statistics, California State University Los Angeles, Los Angeles, CA 90032, USA)

  • Linus Nyiwul

    (Department of Economics, Gettysburg College, Gettysburg, PA 17325, USA
    The authors have not received any grants for this work.)

Abstract

In this paper, we assess the impacts of the five most recent pandemics on the volatility of stock prices across forty-nine sectors of the economy in the United States. These five most recent pandemics are the 1957–1958 Asian flu, the 1977 Russian flu, SARS-CoV-1, swine flu and COVID-19. Applying the GJR-GARCH model, we find that pandemics other than COVID-19 have heterogeneous impacts on the volatility of stock returns. The results of our analysis indicate that COVID-19 has increased the volatility of stock returns in all sectors. Similarly, stocks in more than seventy percent of sectors in our study declined during the ongoing pandemic, perhaps reflecting the severity of the pandemic. In addition, our results on sectors such as healthcare and natural gas diverge from other literature. The mixed results on SARS-CoV-1 are partially explained by the fact it emerged at a time when stock valuations were particularly pessimistic. In the case of Russian flu, it was relatively short-lived and limited in spread relative to other pandemics in our study.

Suggested Citation

  • Niraj Prasad Koirala & Linus Nyiwul, 2023. "Pandemics and Stock Price Volatility: A Sectoral Analysis," JRFM, MDPI, vol. 16(11), pages 1-24, October.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:11:p:467-:d:1269445
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    References listed on IDEAS

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