Elsevier

Finance Research Letters

Volume 38, January 2021, 101872
Finance Research Letters

Stock Return and the COVID-19 pandemic: Evidence from Canada and the US

https://doi.org/10.1016/j.frl.2020.101872Get rights and content

Highlights

  • We use daily data to study the stock market’s dynamic responses to COVID-19 shock for Canada and the US.

  • COVID-19 uncertainty adversely affects the stock markets.

  • The stock market responses are asymmetric in the increase and decrease in the cases in Canada.

Abstract

We investigate the dynamic responses of stock return to the unexpected changes in the COVID-19 cases and the uncertainty associated with the pandemic. Using daily data from Canada and the US, we find there is a negative effect of an increase in the COVID-19 cases on the stock market in general. Moreover, the stock return responses are asymmetric in the increase and decrease in the cases in Canada. The asymmetry is caused by the negative impact of uncertainty about the pandemic. We also find that uncertainty adversely affects the US stock market. However, the magnitude is small.

Keywords

COVID-19
Stock return
GARCH-in-Mean VAR

JEL classification

C32
G31

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