Has the COVID-19 pandemic shock transmitted to the u.s. stock market: Evidence using bootstrap (A)symmetric fourier granger causality test in quantiles

Abstract

This study investigates whether the COVID-19 shocks transmitted to the U.S. stock market were symmetric or asymmetric using bootstrap quantile asymmetric Granger causality tests with or without the Fourier functions. The results indicate that while low quantiles of stock returns do not respond to COVID-19 shocks, the latter is a powerful predictor of high quantiles of stock returns. Besides, only positive COVID-19 shocks are potent predictors of high quantiles of stock market return. In contrast, adverse shocks adequately predict low quantiles of stock return. These findings have important policy implications for investors and policymakers who implement strategies for market stabilization.