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

28 Pages Posted: 15 Jun 2020

See all articles by Markus Brueckner

Markus Brueckner

The Australian National University

Joaquin Vespignani

University of Tasmania - School of Economics and Finance

Date Written: June 11, 2020

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 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.

Suggested Citation

Brueckner, Markus and Vespignani, Joaquin, Covid-19 Infections and the Performance of the Stock Market: An Empirical Analysis for Australia (June 11, 2020). CAMA Working Paper No. 56/2020, Available at SSRN: https://ssrn.com/abstract=3624676 or http://dx.doi.org/10.2139/ssrn.3624676

Markus Brueckner

The Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

Joaquin Vespignani (Contact Author)

University of Tasmania - School of Economics and Finance ( email )

Commerce Building,
Sandy Bay Campus
Sandy Bay, TAS, Tasmania 7005
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
48
Abstract Views
507
PlumX Metrics