The impact of COVID-19 vaccination on stock market: is there any difference between developed and developing countries?

Abstract

This study analyzes the impact of COVID-19 vaccination on the stock markets of 77 countries in the period March 11, 2020-October 29, 2021. Using the panel data vector autoregression (PVAR) model, we find that COVID-19 vaccination has a positive impact on stock markets of developing countries and a negative impact on developed countries. Variance decomposition results shows that COVID-19 vaccination explains 0.00022% and 0.00026% of stock market return in developed and developing countries, respectively. Our findings bear important implications: policymakers of developing countries should accelerate mass COVID-19 vaccination programs to recover stock markets, while developed country governments need to combine vaccination with other preventive measures (e.g., mask wearing in indoor public spaces) to limit the spread of the virus, especially when there is a new higher infection variant - Omicron.

Keywords: COVID-19 pandemic; Developed countries; Developing countries; Stock market; Vaccination.