Investigating the Impact of COVID-19 Outbreak On U.S. Stock Market

15 Pages Posted: 16 Feb 2021

See all articles by Achu Dobgima Destin

Achu Dobgima Destin

Cyprus International University - Institute of Graduate Studies and Research

Date Written: February 12, 2021

Abstract

SARS-Cov-2 was first reported in Wuhan, a town in Hubei Province of China with a population of 11 million in December 2019, following an outbreak of non-pneumonia a clear cause. The world health organization (WHO) described it as a pandemic on 11 March 2020. On the economic front, COVID-19 has led more than 200 countries partial or totally lockdown. The objective of this study is to investigate the impact of COVID-19 on U.S stock market. The objective of this study is to investigate the impact of COVID-19 on U.S stock market. The author uses extreme bound analysis for market interpretation and sourced data from the Federal Reserve Economic Database (FRED) and Our World in Data COVID-19, from January 2 to November 16 2020.

The results of the study show that, Foreign Exchange and Stringency Index are the only determinants of Stock Prices from Leamer EBA approach. Again, the normal model show that, Interest Rate, TED spread (i.e. the difference between the 3 months Treasury bill and the 3-month LIBOR based in U.S. dollars), Foreign Exchange, and Stringency Index are robust determinants of Stock Prices while the generic model highlights the importance of TED spread, Foreign Exchange, Stringency Index, Interest Rate. In addition, the correlation matrix show that, Bitcoin, Interest Rate, Foreign exchange and Gold Price have a Positive Impact on Stock Price while Stringency Index and the TED Spread has a negative significant relationship with stock prices.

Keywords: Stock Market, Foreign Exchange, Interest Rate, COVID-19, Stringency Index

JEL Classification: G01, M01

Suggested Citation

destin, achu dobgima, Investigating the Impact of COVID-19 Outbreak On U.S. Stock Market (February 12, 2021). Available at SSRN: https://ssrn.com/abstract=3784971 or http://dx.doi.org/10.2139/ssrn.3784971

Achu dobgima Destin (Contact Author)

Cyprus International University - Institute of Graduate Studies and Research ( email )

Cyprus

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