COVID-19 effects on the S&P 500 index

ABSTRACT

This paper investigates the effects of the coronavirus disease 2019 (COVID-19) cases in the US on the S&P 500 Index using daily data covering the period between 21st January, 2020 and 10th August, 2021. The investigation is achieved by using a structural vector autoregression model, where a measure of the global economic activity and the spread between 10-year treasury constant maturity and the federal funds rate are also included. The empirical results suggest that having $1\mathrm{\%}$ of an increase in cumulative daily COVID-19 cases in the US results in about $0.01\mathrm{\%}$ of a cumulative reduction in the S&P 500 Index after 1 day and about $0.03\mathrm{\%}$ of a reduction after 1 week. Historical decomposition of the S&P 500 Index further suggests that the negative effects of COVID-19 cases in the US on the S&P 500 Index have been mostly observed during March 2020.

JEL CLASSIFICATION:

• F44
• G15
• I10

KEYWORDS:

• Coronavirus
• COVID-19
• S&P 500 index
• baltic dry index

Acknowldgments

The author would like to thank the editor Mark Taylor and two anonymous referees for their helpful comments and suggestions. The usual disclaimer applies.

Disclosure statement

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

Notes

¹ This is based on the New York Times data published at https://github.com/nytimes/covid-19-data.

² The S&P 500 Index is also globally important as it causes price movements in other financial markets according to studies such as by Lento and Gradojevic (2021).

³ The web page is https://tradingeconomics.com/commodity/baltic.

⁴ The web page is https://fred.stlouisfed.org/.

⁵ The web page is https://github.com/nytimes/covid-19-data.