Deaths, panic, lockdowns and US equity markets: The case of COVID-19 pandemic

Ahmed S Baig; Hassan Anjum Butt; Omair Haroon; Syed Aun R Rizvi

doi:10.1016/j.frl.2020.101701

Deaths, panic, lockdowns and US equity markets: The case of COVID-19 pandemic

Financ Res Lett. 2021 Jan:38:101701. doi: 10.1016/j.frl.2020.101701. Epub 2020 Jul 25.

Authors

Ahmed S Baig¹, Hassan Anjum Butt², Omair Haroon¹, Syed Aun R Rizvi¹

Affiliations

¹ Suleman Dawood School of Business, Lahore University of Management Sciences (LUMS), Lahore, Pakistan.
² The Robert W. Plaster College of Business, Missouri Southern State University, Joplin, MO. United States.

Abstract

This study investigates the impact of COVID-19 pandemic on the microstructure of US equity markets. In particular, we explain the liquidity and volatility dynamics via indexes that capture multiple dimensions of the pandemic. Our results suggest that increases in confirmed cases and deaths due to coronavirus are associated with a significant increase in market illiquidity and volatility. Similarly, declining sentiment and the implementations of restrictions and lockdowns contribute to the deterioration of liquidity and stability of markets.

Keywords: COVID-19; Liquidity; Lockdowns; Pandemic; Sentiment; Volatility.