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Impact of Economic Uncertainty Related to Stock Market Uncertainty during the COVID-19 Pandemic Epidemic
Krieger School of Arts and Sciences Advanced Academic Programs, Johns Hopkins University, Baltimore, USA
- 1 Krieger School of Arts and Sciences Advanced Academic Programs, Johns Hopkins University, Baltimore, USA
Journal of Financial Risk Management·Volume 11 (2022)·Pages 767–778·Published 9 November 2022·DOI10.4236/jfrm.2022.114038
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Abstract
This paper examines the impact of economic uncertainty on the stock market crisis during the COVID-19 epidemic. We construct a GARCH type of model to measure the daily skewness of S&P 500 for the tail risk of the U.S. stock market. We measure economic uncertainty using three indices including the EPU (Economic Policy Uncertainty Index), EMU (Equity Market-related Economic Uncertainty Index), and EMI (Equity Market Volatility: Infectious Disease Tracker). The empirical findings reveal a positive correlation between daily skewness and economic uncertainty and this correlation gets stronger after the outbreak of the COVID-19 pandemic. Our results embrace consistent economic policy scheme s for overall stock market stability.
KeywordsCOVID-19Economic Policy UncertaintyStock UncertaintySkewnessEPU (Economic Policy Uncertainty Index)EMU (Equity Market-Related Economic Uncertainty Index)EMI (Equity Market Volatility: Infectious Disease Tracker)
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