The nexus between COVID-19 fear and stock market volatility

Figures & data

Table 1. Panel unit root test.

Constructs	LLC	FADF	FPP	IPS	Stationary level
COVID-19 RCIt	1.91	11.07	11.07	2.00	–
$\Delta$ COVID-19 RCIt	–0.22*	32.14*	78.3*	–0.10	l(1)
COVID-19 RDIt	2.75	9.00	3.19	0.12	–
$\Delta$ COVID-19 RDIt	–13.51*	71.75*	22.09*	–7.34*	l(1)
COVID-19 GFIt	4.66	3.20	5.49	0.99
$\Delta$ COVID-19 GFIt	–1.00*	86.01*	34.29*	–1.38*	l(1)
MAt	5.09	4.80	4.73	1.20
$\Delta$ MAt	–2.17*	60.12*	24.4*	–2.27*	l(1)
MA-CCt	11..50	32.11*	49.50*	6.18
$\Delta$ MA-CCt	–3.07*	20.00*	27.12*	–3.13*	l(1)
MA-POLt	5.19	28.08	28.08	4.01
$\Delta$ MA-POLt	–0.04*	40.01*	72.34*	–4.67	l(1)

Note: LLC, Levin-Lin-Chu test; FADF, Fisher-augmented Dickey-Fuller test; FPP, Fisher Phillips–Perron test; IPS, Im-Pesaran-Shin test;.

* denotes significance at the 5% level. Source: Authors’ calculations using R-Studio 10 software.

Source: Authors calculation.

Table 2. Autoregressive distributed lag (ARDL) test.

Variable	Coefficient	Std. Error	t-Statistic	Prob.*
C	40.11*	29.85	4.13	0.000
COVID-19 RCI	8.47*	15.00	2.75	0.000
COVID-19 RDI	10.34*	29.25	6.67	0.003
COVID-19 GFI	19.55*	0.006	4.48	0.001
MA	31.12*	67.04	4.09	0.000
MA-CC	16.47*	0.201	2.77	0.000
MA-POL	25.33*	0.572	0.52	0.000
R-Square	0.51	Mean dependent variance		1.30
Adjusted R-Square	0.38	S.D. dependent variance		72.81
Standard error	14.21	Akaike info criterion		8.01
Log L.H.	–299.36	Hannan-Quinn Criterion		6.35
Prob (F-statistic)	0.010	Durbin Watson		1.97

Source: Authors’ calculation.

Table 3. Robustness test.

Variable	Coefficient	SE	T-stats	Sig.	Pseudo R^2	Sparsity
τ = 10^th
COVID-19 RCI	3.24*	4.18	1.58	0.000	0.88	1045.12
COVID-19 RDI	1.69*	0.89	0.33	0.017		(0.000)
COVID-19 GFI	1.56*	0.75	0.46	0.000
MA-CC	0.76*	0.15	0.89	0.027
MA-POL	0.39*	0.27	0.66	0.014
C	107.99	111.83	0.65	0.011
τ = 25^th
COVID-19 RCI	3.03*	1.11	1.08	0.040	0.72	1323.05
COVID-19 RDI	1.05*	0.57	0.99	0.028		(0.000)
COVID-19 GFI	0.98*	0.77	0.20	0.000
MA-CC	0.67*	0.90	0.22	0.001
MA-POL	0.89*	0.63	0.01	0.003
C	123.74	217.01	0.85	0.000
τ = 50^th
COVID-19 RCI	4.18*	3.13	4.44	0.000	0.82	1066.89
COVID-19 RDI	3.99*	2.47	3.11	0.025		(0.000)
COVID-19 GFI	2.02*	2.59	0.01	0.039
MA-CC	1.25*	0.63	0.79	0.020
MA-POL	4.09*	0.20	0.65	0.027
C	167.34	202.87	0.77	0.010
τ = 75^th
COVID-19 RCI	6.42*	0.67	3.18	0.040	0.89	1783.76
COVID-19 RDI	5.01*	0.24	0.10	0.001		(0.000)
COVID-19 GFI	2.76*	0.01	0.37	0.035
MA-CC	0.64*	0.73	0.03	0.019
MA-POL	0.78*	0.41	0.09	0.011
C	101.34	105.26	0.25	0.008
τ = 90^th
COVID-19 RCI	11.29	3.00	7.37	0.007	0.74	1724.83
COVID-19 RDI	5.77*	2.65	0.29	0.000		(0.000)
COVID-19 GFI	6.22*	2.15	0.00	0.000
MA-CC	1.47*	1.01	0.84	0.026
MA-POL	1.80*	0.20	0.13	0.027
C	70.01	89.08	0.86	0.000

* p-value < (0.05) significance level. Source: Authors’ calculation.

Figure 1. Wavelet coherence between stock return and COVID-19 cases.

Source: Authors calculation.

Table 4. Effects of Covid-19 on stock market volatility.

	(1)	(2)	(2)	(3)	(4)	(5)
	Levine 2002			Cuadro-Sáez & García-Herrero 2007
COVID-19	0.177			0.343
	(0.242)			(0.488)
S&P500		–0.128***			–1.411***
		(0.221)			(0.412)
NASDAQ			–0.161**			–1.05**
			(0.124)			(0.342)
DOW	–0.188**	–0.142***	–0.042	–0.152**	–0.145***	–0.054
	(0.051)	(0.042)	(0.041)	(0.042)	(0.051)	(0.038)
DAX	–0.172***	–0.122***	–0.012***	–0.121***	–0.177***	–0.031***
	(0.184)	(0.183)	(0.204)	(0.222)	(0.248)	(0.222)
CRIA	–0.237***	–0.254***	–0.212*	–0.228***	–0.222***	–0.202*
	(0.385)	(0.302)	(0.325)	(0.375)	(0.244)	(0.355)
Cyprus	–1.428***	–1.432***	–0.443*	–1.328***	–0.472*	–0.342*
	(0.324)	(0.302)	(0.325)	(0.375)	(0.244)	(0.355)
Constant	3.322	3.380	5.504**	3.522	4.422*	4.414**
	(2.444)	(2.534)	(2.142)	(2.052)	(2.457)	(2.202)
AR(2) p-value	0.472	0.774	0.532	0.820	0.855	0.182
Hansen p-value	0.332	0.435	0.884	0.423	0.472	0.884

Source: Authors calculation.

Table 5. Unit root test.

Constructs	First-order differences
RCI	–1.22(3)	–6.66(2)*
RDI	–1.29(3)	–6.70(1)*
GFI	–1.28(3)	–6.55(2)*
SMVI	–1.24(3)	–6.59(2)*

Source: Authors’ calculation.

Table 6. AR (1) – GJR (1, 1) model estimates¹.

	S & P (500)	NASDAQ	DOW	DAX	CRIA	Cyprus
C0	–0.0215* (0.000)	–0.0271* (0.000)	–0.0196* (0.000)	–0.0393* (0.000)	–0.0299* (0.000)	–0.0118* (0.000)
C1	0.0024* (0.000)	0.0118* (0.000)	0.0056* (0.000)	0.0459* (0.000)	0.0026* (0.000)	0.0016* (0.000)
Ω	0.0005* (0.000)	0.0001* (0.000)	0.0011* (0.000)	0.0058* (0.000)	0.0036* (0.000)	0.0000* (0.000)
Α	0.0351* (0.000)	0.0642* (0.000)	0.0222* (0.000)	0.0788* (0.000)	0.0494* (0.000)	0.0205* (0.000)
Β	0.5634* (0.000)	0.2228* (0.000)	0.2188* (0.000)	0.6749* (0.000)	0.5221* (0.000)	0.2017* (0.000)
Γ	0.2701* (0.000)	0.3600* (0.000)	0.1212* (0.000)	0.4964* (0.000)	0.3903* (0.000)	0.1918* (0.000)
Υ	2.26* (0.000)	2.09* (0.000)	2.11* (0.000)	2.87* (0.000)	2.40* (0.000)	2.22* (0.000)
Λ	–0.7087* (0.000)	–0.0169* (0.000)	0.2333* (0.000)	–0.6945* (0.000)	0.4404* (0.000)	0.0592* (0.000)
LL	1245.11	354.58	101.00	726.08	404.52	116.56
AIC	–3127.04	–220.77	–60.55	–313.27	–197.40	–100.11
BIC	–3101.87	–394.45	–156.33	–1559.74	–1785.09	–131.31

¹ Here presented model about four markets followed Skewed t distribution regarding calculations.

Source: Authors calculation.

Table 7. GARCHX estimation for robustness for GFI and SMVI co-movement.

	Mean Equation	Variance Equation
C	0.037 (0.21)	–
Stock Market Volatility Index	–0.7429* (0.000)	–
GFI Index of COVID-19	–2.7745* (0.000)	–
C	–	0.0042* (0.000)
h(–1)	–	0.5634* (0.000)
η 2 (−1)	–	0.4911* (0.0000
GFI Index of COVID-19	–	–0.114 (0.000) *
Diagnostics
LM test for Heteroscedasticity	(0.67)	(0.71)

Source: Authors’ calculation.