COVID-19 Containment Measures and Expected Stock Volatility : High-Frequency Evidence from Selected Advanced Economies /

We study the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies, using event studies with hand-collected minute-level data and panel regressions with daily data. We find that six-month-ahead volatility indices dropped following announcements of init...

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Bibliographic Details
Main Author: Acharya, Viral
Other Authors: Liu, Yang, Zhao, Yunhui
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2021.
Series:IMF Working Papers; Working Paper ; No. 2021/157
Subjects:
Online Access:Full text available on IMF
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520 3 |a We study the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies, using event studies with hand-collected minute-level data and panel regressions with daily data. We find that six-month-ahead volatility indices dropped following announcements of initial or re-imposed lockdowns, and that they did not drop significantly following the easing of lockdowns. Such patterns are not as strong for three-month-ahead expected volatility and generally absent for one-month-ahead expected volatility. These results provide suggestive evidence for the existence of an intertemporal trade-off: although stringent containment measures cause short-term economic disruptions, they may reduce medium-term uncertainty (reflected in expected stock volatility) by boosting markets' confidence that the outbreak would be under control more quickly. 
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700 1 |a Zhao, Yunhui. 
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