Abstract
This paper examines relative stock market performance following the onset of the coronavirus pandemic for a sample of 80 stock markets. Weekly data on coronavirus cases and deaths are employed alongside Oxford indices on each nation’s stringency and government support intensity. The results are broken down both by month and by geographical region. The full sample results show that increased coronavirus cases exert the expected overall effect of worsening relative stock market performance, but with little consistent impact of rising deaths. There is some evidence of significantly negative stock market effects arising from lockdowns as reflected in the Oxford stringency index. There are also positive reactions to government support in March and December in the overall sample—combined with some additional pervasive effects seen in mid-2020 in Latin America.
Highlights
The coronavirus pandemic of 2020 represented the most devastating health crisis since the Spanish Flu of 1918–1919
Whereas the existing literature on the stock market effects of the pandemic has primarily focused on just the early crisis period in the first quarter of 2020, this paper assesses virus effects and government policy effects through December 2020 for a broad sample of 80 world stock markets
The overall results offer some support for growth in coronavirus cases and stringency hurting stock market performance, together with some evidence that 2020 government support measures helped the market both in March and late in the year
Summary
The coronavirus pandemic of 2020 represented the most devastating health crisis since the Spanish Flu of 1918–1919. The record-breaking 33.7% drop in the S&P 500 stock market index between 19 February and 23 March 2020 was accompanied by massive declines in most other major stock markets around the world. This was quickly followed by record GDP declines in the second quarter of 2020 in the United States and many European countries. Most of these same countries enjoyed a major stock market boom from the March lows in the face of massive central bank liquidity expansion (Burdekin 2020a).. A major difference between the 1918–1919 and 2020–2021 experiences remains the far lesser extent of the lockdowns and government intervention seen during the earlier episode.
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