COVID-19 Effects on the US Stock Index Returns: An Event Study Approach

Abstract

This paper aims to measure the impact of COVID-19 pandemic on the US stock market.It applies Generalized Autoregressive Conditional Heteroskedasticity (GARCH), Vector Autoregressive (VAR) and Event study Method (ESM) models. The ESM follows three different timelines, such as pre-event, event-day, post-event windows. Data comes from the major US stock indices. We find that the US stock market reacts negatively toward confirmed and death cases due to COVID-19, while death cases have a significant impact on stock market volatility. This study bridges the research gap and adds significant insights to the existing literature.