Abstract
AbstractThe effect of COVID-19 on stock market performance has important implications for both financial theory and practice. This paper examines the relationship between COVID-19 and the instability of both stock return predictability and price volatility in the U.S over the period January 1st, 2019 to June 30th, 2020 by using the methodologies of Bai and Perron (Econometrica 66:47–78, 1998. 10.2307/2998540; J Appl Econo 18:1–22, 2003. 10.1002/jae.659), Elliot and Muller (Optimal testing general breaking processes in linear time series models. University of California at San Diego Economic Working Paper, 2004), and Xu (J Econ 173:126–142, 2013. 10.1016/j.jeconom.2012.11.001). The results highlight a single break in return predictability and price volatility of both S&P 500 and DJIA. The timing of the break is consistent with the COVID-19 outbreak, or more specifically the stock selling-offs by the U.S. senate committee members before COVID-19 crashed the market. Furthermore, return predictability and price volatility significantly increased following the derived break. The findings suggest that the pandemic crisis was associated with market inefficiency, creating profitable opportunities for traders and speculators. Furthermore, it also induced income and wealth inequality between market participants with plenty of liquidity at hand and those short of funds.
Funder
National Social Science Foundation of China
Social Science Foundation of Jiangxi Province
Publisher
Springer Science and Business Media LLC
Subject
Management of Technology and Innovation,Finance
Cited by
66 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献