IDEAS home Printed from https://ideas.repec.org/p/acb/cbeeco/2020-674.html

Covid-19 Infections and the Performance of the Stock Market: An Empirical Analysis for Australia

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp674.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Warwick McKibbin & Roshen Fernando, 2021. "The Global Macroeconomic Impacts of COVID-19: Seven Scenarios," Asian Economic Papers, MIT Press, vol. 20(2), pages 1-30, Summer.
    2. Editors, 2020. "Software updates," Stata Journal, StataCorp LLC, vol. 20(2), pages 504-504, June.
    3. Albert Lee & Amelia Lo & Queenie Li & Vera Keung & Amy Kwong, 2020. "Health Promoting Schools: An Update," Applied Health Economics and Health Policy, Springer, vol. 18(5), pages 605-623, October.
    4. Editors, 2020. "Software updates," Stata Journal, StataCorp LLC, vol. 20(3), pages 757-758, September.
    5. Caggiano, Giovanni & Castelnuovo, Efrem & Kima, Richard, 2020. "The global effects of Covid-19-induced uncertainty," Economics Letters, Elsevier, vol. 194(C).
    6. Cristiana Benedetti-Fasil & Petr Sedláček & Vincent Sterk, 2022. "Startups and employment following the COVID-19 pandemic: a calculator," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(111), pages 507-533.
    7. Editors, 2020. "Software updates," Stata Journal, StataCorp LLC, vol. 20(4), pages 1028-1030, December.
    8. Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 1-50.
    9. Editors, 2020. "Software updates," Stata Journal, StataCorp LLC, vol. 20(1), pages 250-251, March.
    10. Valerie A. Ramey & Sarah Zubairy, 2018. "Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 850-901.
    11. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
    12. Scott R. Baker & Nicholas Bloom & Steven J. Davis & Stephen J. Terry, 2020. "COVID-Induced Economic Uncertainty," NBER Working Papers 26983, National Bureau of Economic Research, Inc.
    13. Caggiano, Giovanni & Castelnuovo, Efrem & Kima, Richard, 2020. "The global effects of Covid-19-induced uncertainty," Economics Letters, Elsevier, vol. 194(C).
    14. R. Andres Castaneda Aguilar & Tony H. M. J. Fujs & Dean M. Jolliffe & Christoph Lakner & Daniel Gerszon Mahler & Minh C. Nguyen & Marta Schoch & David L. Vargas Mogollon & Martha C. Viveros Mendoza & , 2020. "September 2020 PovcalNet Update: What's New," Global Poverty Monitoring Technical Note Series 14, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Gangopadhyay, Partha & Pradhan, Rudra P. & Das, Narasingha, 2024. "Asymmetric shocks of the COVID-19 pandemic on the Australian stock market: Evidence from multiple threshold nonlinear ARDL (MTNARDL) approach," International Economics, Elsevier, vol. 179(C).
    3. 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.
    4. Masagus M. Ridhwan & Solikin M. Juhro & Affandi Ismail & Peter Nijkamp & Kelvin Ramadhan Hidayat, 2024. "Did COVID-19 Disrupt the Stock Market Return and Volatility? A Meta-Analytic Approach," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 27(1), pages 25-82, March.
    5. 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.
    6. 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.
    7. 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.
    8. Richard Mawulawoe Ahadzie & Dan Daugaard & Moses Kangogo & Faisal Khan & Joaquin Vespignani, 2024. "COVID‐19, Mobility Restriction Policies and Stock Market Volatility: A Cross‐Country Empirical Study," Economic Papers, The Economic Society of Australia, vol. 43(2), pages 184-203, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simionescu, Mihaela & Raišienė, Agota Giedrė, 2021. "A bridge between sentiment indicators: What does Google Trends tell us about COVID-19 pandemic and employment expectations in the EU new member states?," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    2. Kok, Sien & Le Clec'h, Solen & Penning, W. Ellis & Buijse, Anthonie Dirk & Hein, Lars, 2025. "Trade-offs in ecosystem services under various river management strategies of the Rhine Branches," Ecosystem Services, Elsevier, vol. 72(C).
    3. Ines Abdelkafi & Sahar Loukil & YossraBen Romdhane, 2023. "Economic Uncertainty During COVID-19 Pandemic in Latin America and Asia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1582-1601, June.
    4. Miescu, Mirela & Rossi, Raffaele, 2021. "COVID-19-induced shocks and uncertainty," European Economic Review, Elsevier, vol. 139(C).
    5. Jianchun Fang & Giray Gozgor & Sercan Pekel, 2020. "Where You Export Matters: Measuring Uncertainty in Turkey's Export Markets," CESifo Working Paper Series 8404, CESifo.
    6. Huynh, Toan Luu Duc & Foglia, Matteo & Nasir, Muhammad Ali & Angelini, Eliana, 2021. "Feverish sentiment and global equity markets during the COVID-19 pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1088-1108.
    7. Morita, Hiroshi & Ono, Taiki, 2024. "COVID-19 uncertainty index in Japan: Newspaper-based measures and economic activities," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 390-403.
    8. Heather Anderson & Giovanni Caggiano & Farshid Vahid & Benjamin Wong, 2020. "Sectoral Employment Dynamics in Australia," CAMA Working Papers 2020-51, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Afees A. Salisu & Idris A. Adediran & Rangan Gupta, 2021. "A Note on the COVID-19 Shock and Real GDP in Emerging Economies: A Counterfactual Analysis from the Threshold-Augmented Global Vector Autoregressive Model," Working Papers 202149, University of Pretoria, Department of Economics.
    10. Peng-Fei Dai & Xiong Xiong & Zhifeng Liu & Toan Luu Duc Huynh & Jianjun Sun, 2021. "Preventing crash in stock market: The role of economic policy uncertainty during COVID-19," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-15, December.
    11. Gupta, Rangan & Subramaniam, Sowmya & Bouri, Elie & Ji, Qiang, 2021. "Infectious disease-related uncertainty and the safe-haven characteristic of US treasury securities," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 289-298.
    12. Pop, Ionuț Daniel, 2022. "COVID-19 crisis, voters’ drivers, and financial markets consequences on US presidential election and global economy," Finance Research Letters, Elsevier, vol. 44(C).
    13. Demiralay, Sercan & Gencer, Hatice Gaye & Bayraci, Selcuk, 2021. "How do Artificial Intelligence and Robotics Stocks co-move with traditional and alternative assets in the age of the 4th industrial revolution? Implications and Insights for the COVID-19 period," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
    14. Klose, Jens & Tillmann, Peter, 2022. "The Real and Financial Impact of COVID-19 Around the World," VfS Annual Conference 2022 (Basel): Big Data in Economics 264030, Verein für Socialpolitik / German Economic Association.
    15. Gupta, Rangan & Sheng, Xin & Balcilar, Mehmet & Ji, Qiang, 2021. "Time-varying impact of pandemics on global output growth," Finance Research Letters, Elsevier, vol. 41(C).
    16. Khalid Usman & Usman Bashir, 2022. "The Effects of Imports and Economic Growth in Chinese Economy: A Granger Causality Approach under VAR Framework," JRFM, MDPI, vol. 15(11), pages 1-14, November.
    17. Xingyuan Yao, 2021. "COVID-19 Pandemic and economic stimulus policy inequality: evidence from quasi-natural experiments," Working Papers 585, ECINEQ, Society for the Study of Economic Inequality.
    18. Lesame, Keagile & Ngene, Geoffrey & Gupta, Rangan & Bouri, Elie, 2024. "Herding in international REITs markets around the COVID-19 pandemic," Research in International Business and Finance, Elsevier, vol. 67(PB).
    19. Kizys, Renatas & Tzouvanas, Panagiotis & Donadelli, Michael, 2021. "From COVID-19 herd immunity to investor herding in international stock markets: The role of government and regulatory restrictions," International Review of Financial Analysis, Elsevier, vol. 74(C).
    20. Salisu, Afees A. & Ayinde, Taofeek O. & Gupta, Rangan & Wohar, Mark E., 2022. "Global evidence of the COVID-19 shock on real equity prices and real exchange rates: A counterfactual analysis with a threshold-augmented GVAR model," Finance Research Letters, Elsevier, vol. 47(PA).

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:acb:cbeeco:2020-674. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/feanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.