Impact of COVID-19 on Financial Returns: A Spatial Dynamic Panel Data Model with Random Effects

21 Pages Posted: 22 Dec 2021

See all articles by Anna Gloria Billé

Anna Gloria Billé

University of Padua

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Date Written: December 21, 2021

Abstract

Using data for most of the year 2020, we analysed the impact of COVID-19 deaths on a given country regarding the financial market returns of neighbouring countries. Our empirical evidence show that in the first weeks of the COVID-19 outbreak, until mid-March 2020, the spatial effect of COVID-19 deaths was statistically significant, leading to a contraction in returns and an increase in risk. Moreover, the effects disappeared in the remaining months as financial market moved back to pre-crisis levels, causing a decrease in the overall risk. Our evidence supports a behavioural impact of the pandemic on financial markets.

Keywords: COVID-19, Financial crisis, Spatio-temporal modeling

JEL Classification: C23, C33, G01, G15, C58

Suggested Citation

Billé, Anna Gloria and Caporin, Massimiliano, Impact of COVID-19 on Financial Returns: A Spatial Dynamic Panel Data Model with Random Effects (December 21, 2021). Available at SSRN: https://ssrn.com/abstract=3990761 or http://dx.doi.org/10.2139/ssrn.3990761

Anna Gloria Billé (Contact Author)

University of Padua ( email )

Via C. Battisti, 241
Padova, Padua 35121
Italy

HOME PAGE: http://homes.stat.unipd.it/annagloriabille/

Massimiliano Caporin

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

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