Asymmetric Shocks of the COVID-19 Pandemic on the Australian Stock Market: Evidence from Multiple Threshold Nonlinear ARDL (MTNARDL) Approach

Abstract

This study investigates the asymmetric effects of the COVID-19 pandemic on the Australian stock market using a novel methodology (MTNARDL). We find surprising results: in the short-term, the pandemic's impact is statistically insignificant for moderate levels of pandemic intensity (30-70% range). However, for both more severe outbreaks (above 70%) and less intense initial stages (below 30%), the pandemic shows short-term negative effects. Interestingly, these adverse effects become consistent across all intensity levels in the long-term. Additionally, our analysis reveals counterintuitive relationships between daily economic activity and stock market performance at different pandemic intensity thresholds.