Abstract
In this study, the effects of COVID-19 (mortality rate, case rate, and bed capacity) on the stock market was examined within the framework of the efficient market hypothesis. Unlike other studies in the literature, we used the variable of bed capacity besides the mortality rate and case rate variables. The relationship between the mentioned variables, using daily data between December 31 of 2019 and November 10 of 2020, has been analyzed with time-varying symmetric and asymmetric causality tests for China, Germany, the USA, and India. Considering that the responses to positive and negative shocks during the pandemic process may be different and that the results may change depending on time, time-varying symmetric and asymmetric causality tests were used. According to the time-varying symmetric causality test, stock markets in all countries were affected in the period when the cases first appeared. A causal relationship between COVID-19 and country stock markets was found. The results showed that the effects of the case rate and bed capacity on the stock market occurred around the same time in Germany and the United States; however, these dates differed in China and India. According to time-varying asymmetric causality test findings, the asymmetric effect of the pandemic on the stock market in countries emerged during the second wave. The findings showed that the period during which positive and negative information about the pandemic intensified coincided with the period during which the second wave occurred; besides, the results show the effect of this information on the stock market differed as positive and negative shocks.
Highlights
A new type of coronavirus called COVID-19 first appeared in Wuhan, China, in December 2019 and has caused great damage worldwide
The method used here allows the detection of negative shocks and positive shocks as positive shocks and negative shocks, respectively, during the COVID-19 pandemic period
The date of the first wave of the pandemic fell to June, when countries entered a period of normalization; the second wave covered the period when the cases increased again after the normalization process
Summary
A new type of coronavirus called COVID-19 first appeared in Wuhan, China, in December 2019 and has caused great damage worldwide. When the contagion process of the pandemic and the periods in which the cases increase are analyzed on a regional basis, the following dates and regions emerge: the first increase in the number of cases in the Western Pacific, which started on February 13; the second increase in cases on March 10 in Europe, the United States, the Eastern Mediterranean, the Western Pacific, Southeast Asia and Africa; the third beginning on August 1 in the United States, Southeast Asia, Europe, Africa, the Eastern Mediterranean and the Western Pacific; and the fourth beginning on November 6 in the EU, the United States, Southeast Asia, the Eastern Mediterranean, Africa and the Western Pacific. While China ranked first in the first increase in cases of the pandemic, Europe was first in the second increase, the USA in the third increase and again Europe in the fourth increase as the epicenter of the virus infections. As of November 10, 2020, there have been more than 50 million confirmed cases and 1,258,000 deaths in 208 countries, with the countries most affected by the pandemic being the United States, India, Brazil, Russia, France, Spain, Argentina, England, Colombia, and Mexico (WHO, 2020)
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