The VolCo index: a measure of the transition from pandemic to equity market

ABSTRACT

The COVID-19 has serious impacts on the economy and contaminates the equity market because its spread leads to enormous uncertainty, which can be measured by various volatilities from backward and forward information contents. We find that the pandemic-related data are significant for regressing various volatilities. Hence, we construct the index termed the Volatility of COVID-19 pandemic (VolCo) as a proxy of equity market volatility, including GJR-GARCH volatility, instantaneous volatility, VIX index and their combination. This VolCo index provides an explanation for the volatility of equity market in the period of COVID-19 spreads.

KEYWORDS:

• COVID-19 pandemic
• volatility
• VolCo index
• case curvature
• death rate

JEL CLASSIFICATION:

• C1
• C5

Abbreviations

VolCo: the Volatility of COVID-19 pandemic

GARCH: Generalized Autoregressive Conditional Heteroskedasticity

Availability of data and material

Fortunately, our data are public because it comes from the website of OurWorldInData.org and Bloomberg.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by MOST, [109-2218-E-007 −013 -].