Does COVID-19 Affect the Financial Market?

Abstract

This paper studies the relationship between the COVID-19, an infectious disease, and different financial assets. We find that the change in the newly confirmed cases per thousand people in US rather than that in China can positively predict the S&P 500 return. Moreover, we find that the change in the newly disease confirmed cases per thousand persons in US is negatively correlated with the change in the T-Bill spread. However, we observe that the change of China disease newly confirmed cases per thousand people can positively or negatively affect the change in the T-Bill spread. Furthermore, the change in the newly confirmed cases per thousand people cannot predict the Bitcoin return whatever of US or China.

Keywords: COVID-19, S&P 500 index, Bitcoin, T-Bill, Return

JEL Classification: C22, G15, D81