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Covid-19 infections and the performance of the stock market: An empirical analysis for Australia


  • Markus Brueckner
  • Joaquin Vespignani


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 control variables for stock market volatility, i.e. the ASX-200 VIX; the USD-AUD exchange rate and the international oil price; news by the World Health Organization regarding a Covid-19 pandemic and public health emergency; and 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.

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  • Markus Brueckner & Joaquin Vespignani, 2020. "Covid-19 infections and the performance of the stock market: An empirical analysis for Australia," CAMA Working Papers 2020-56, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2020-56

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    9. 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.
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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic consequences > Stock market


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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.

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


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