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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 characterize 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 the USD-AUD exchange rate and the international oil price; including in the model news by the World Health Organization regarding a Covid-19 pandemic and public health emergency; and including in the model 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 US. 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, 2020. "Covid-19 Infections and the Performance of the Stock Market: An Empirical Analysis for Australia," ANU Working Papers in Economics and Econometrics 2020-674, Australian National University, College of Business and Economics, School of Economics.
  • Handle: RePEc:acb:cbeeco:2020-674
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    Cited by:

    1. 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.
    2. 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.

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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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • I00 - Health, Education, and Welfare - - General - - - General

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