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A difference in COVID-19 impact on bank stocks between Japan and the US

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  • Takashi Kanamura

    (Kyoto University)

Abstract

We aim to empirically analyze the impact of COVID-19 on Japanese and US bank stocks. The contribution of this study is threefold. First, a simple econometric analysis proposes a regime-switching model of bank stock price returns due to the impact of COVID-19 by incorporating the direct one of the number of COVID-19-infected individuals on the returns. Second, our empirical analyses show that the number of COVID-19 cases does not directly impact Japanese bank stock price returns, and that directly positively impacts the US ones in a high volatility regime. However, they also show that regarding regime probabilities, both stock prices switch to the high volatility regime immediately after the occurrence of COVID-19, indicating the indirect COVID-19 impacts. Finally, we find mean-reversion in stock prices for US banks but not for Japanese banks. It suggests that under the indirect impacts, the effects of COVID-19 on US bank stock price volatility tend to dissipate in the short run and that Japanese bank stocks have a long-lasting influence from COVID-19. Considering the direct and indirect impacts, and the mean-reversions, US bank stock prices may be resilient to COVID-19, but this is not for Japanese bank stock prices.

Suggested Citation

  • Takashi Kanamura, 2023. "A difference in COVID-19 impact on bank stocks between Japan and the US," SN Business & Economics, Springer, vol. 3(7), pages 1-23, July.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:7:d:10.1007_s43546-023-00485-6
    DOI: 10.1007/s43546-023-00485-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank stocks in Japan; Regime-switching volatility; Mean-reversion; COVID-19; Resilience;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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