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Stock Return and the COVID-19 pandemic: Evidence from Canada and the US

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  • Xu, Libo

Abstract

We investigate the dynamic responses of stock return to the unexpected changes in the COVID-19 cases and the uncertainty associated with the pandemic. Using daily data from Canada and the US, we find there is a negative effect of an increase in the COVID-19 cases on the stock market in general. Moreover, the stock return responses are asymmetric in the increase and decrease in the cases in Canada. The asymmetry is caused by the negative impact of uncertainty about the pandemic. We also find that uncertainty adversely affects the US stock market. However, the magnitude is small.

Suggested Citation

  • Xu, Libo, 2021. "Stock Return and the COVID-19 pandemic: Evidence from Canada and the US," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s154461232031686x
    DOI: 10.1016/j.frl.2020.101872
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    COVID-19; Stock return; GARCH-in-Mean VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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