The impact of containment measures and monetary and fiscal responses on US financial markets during the COVID-19 pandemic.

This paper analyses the effects of containment measures and monetary and fiscal responses on US financial markets during the Covid-19 pandemic. More specifically, it applies fractional integration methods to analyse their impact on the daily S&P500, the US Treasury Bond Index (USTB), the S&P Green Bond Index (GREEN) and the Dow Jones (DJ) Islamic World Market Index (ISLAM) over the period 1/01/2020-10/03/2021. The results suggest that all four indices are highly persistent and exhibit orders of integration close to 1. A small degree of mean reversion is observed only for the S&P500 under the assumption of white noise errors and USTB with autocorrelated errors; therefore, market efficiency appears to hold in most cases. The mortality rate, surprisingly, seems to have affected stock and bond prices positively with autocorrelated errors. As for the policy responses, both the containment and fiscal measures had a rather limited impact, whilst there were significant announcement effects which lifted markets, especially in the case of monetary announcements. There is also evidence of a significant, positive response to changes in the effective Federal funds rate, which suggests that the financial industry, mainly benefiting from interest rises, plays a dominant role.

Stock market responses to COVID-19: The behaviors of mean reversion, dependence and persistence.

We examine stock market responses during the COVID-19 pandemic period using fractional integration techniques. The evidence suggests that stock markets generally follow a synchronized movement before and the stages of the pandemic shocks. We find while mean reversion significantly declines, the degree of persistence and dependence has been increased in the majority of the stock market indices in whole sample analysis covering the period of August 02, 2019 and July 09, 2020. This outcome implies increasing integration and possibly declining benefits of diversification for the global stock portfolio management.

Measuring Persistence in the US Equity Gender Diversity Index.

An analysis of the SPDR SSGA Gender Diversity Index ETF using fractional integration or I(d) techniques and daily data from 8 March 2016 to 8 January 2021, reveals that the series is highly persistent with an order of integration smaller than, though very close to 1. However, when estimating d recursively across subsamples, two peaks can be observed. The first peak appears in the sample with 679 observations (ending at 26 December 2018) and the second one occurs in the sample with 974 observations and ending at 28 February 2020, which shows the most significant change in d, moving from values within the I(1) interval to values significantly above 1. The findings indicate that the Covid-19 pandemic has had a significant impact on the persistence of the SPDR SSGA Gender Diversity Index ETF, increasing its magnitude and thus the level of persistence.

Gold and silver as safe havens: A fractional integration and cointegration analysis.

This paper investigates whether gold and silver can be considered safe havens by examining their long-run linkages with 13 stock price indices. More specifically, the stochastic properties of the differential between gold/silver prices and 13 stock indices are analysed applying fractional integration/cointegration methods to daily data, first for a sample from January 2010 until December 2019, then for one from January 2020 until June 2022 which includes the Covid-19 pandemic. The results can be summarised as follows. In the case of the pre-Covid-19 sample ending in December 2019, mean reversion is found for the gold price differential only vis-à-vis a single stock index (SP500). whilst in seven other cases, although the estimated value of d is below 1, the value 1 is inside the confidence interval and thus the unit root null hypothesis cannot be rejected. In the remaining cases the estimated values of d are significantly higher than 1. As for the silver differential, the upper bound is 1 only in two cases, whilst in the others mean reversion does not occur. Thus, the evidence is mixed on whether these precious metals can be seen as safe havens, though it appears that this property characterises gold in a slightly higher number of cases. By contrast, when using the sample starting in January 2020, the evidence in favour of gold and silver as possible safe havens is pretty conclusive since mean reversion is only found in a single case, namely that of the gold differential vis-à-vis the New Zealand stock index.

Us vehicles sales. Evidence of persistence after COVID-19.

In this paper, the sales of vehicles in the US are examined to understand if the shock caused by the current COVID-19 pandemic has had permanent or transitory effects on its subsequent evolution. Using monthly data from January 1976 until April 2021 and fractional integration methods, our results indicate that the series reverts and the shocks tend to disappear in the long run, even when they appear to be long lived. The results also indicate that the COVID-19 pandemic has not increased the degree of persistence of the series but, unexpectedly, has slightly reduced its dependence. Thus, shocks are transitory, long lived but, as time goes by, the recovery seems to be faster, which is possibly a sign of the strength of the industry.

The impact of the COVID-19 pandemic on persistence in the European stock markets.

This paper analyses the impact of the Covid-19 pandemic on the degree of persistence of European stock markets. Specifically, it uses fractional integration methods to estimate persistence at the daily, weekly and monthly frequencies in the case of ten major European stock market indices; the effects of the pandemic are assessed by comparing the pre-pandemic estimates (over the period 2005-2019) to those from a sample extended until July 2021 which includes the pandemic period. The approach used is more general than the standard one based on the stationarity versus non-stationarity dichotomy and allows for a wider range of dynamic processes. Three different model specifications are considered, and these are estimated under two alternative assumptions for the disturbances (white noise and autocorrelation). The findings indicate that there has not been any significant impact of the Covid-19 pandemic on the degree of persistence of the European stock market indices, though their volatility persistence has decreased.

CO2 emissions persistence: Evidence using fractional integration

The main cause of climate change are carbon dioxide emissions. In the context of the COVID-19 pandemic, the number of emissions has been significantly reduced for the first time in many years. Now it is necessary to answer the question of whether CO2 emissions are stationary or not, because the results will let us know whether environmental policies have to be strengthened rather than relaxed in intensity. To this end, this paper investigates the persistence in CO2 emissions in a group of countries to determine if shocks in the series have permanent or transitory effects. The results, based on fractional integration indicate evidence of mean reversion, with values of the differencing parameter constrained between 0 and 1 in all cases, independently of the assumption made about the error term (white noise or autocorrelation). Focusing on the areas under examination, it is obtained that the EU27+UK, Japan and the US present the lowest degrees of integration, while Russia, China and India display the highest values. Decreasing time trends are only observed for the EU27+UK and US.

The COVID-19 pandemic and the degree of persistence of US stock prices and bond yields.

This paper analyses the possible effects of the Covid-19 pandemic on the degree of persistence of US monthly stock prices and bond yields using fractional integration techniques. The model is estimated first over the period January 1966-December 2020 and then a recursive approach is taken to examine whether or not persistence has changed during the following pandemic period (up to February 2021). We find that the unit root hypothesis cannot be rejected for stock prices while for bond yields the results differ depending on the maturity date and the specification of the error term. In general, bond yields appear to be more persistent, although there is evidence of mean reversion in case of 1-year yields under the assumption of autocorrelated errors. The recursive analysis shows no impact of the Covid-19 pandemic on the persistence of stock prices, whilst there is an increase in the case of both 10- and 1- year bond yields but not of their spread.

Tourist arrivals and overnight stays along the Croatian Adriatic Coast: Changes in persistence and seasonality from the COVID-19 disruption

This study examines the changes in the persistence and seasonality inherent in the Croatian tourism sector in light of the onset of the COVID-19 pandemic. First, we differentiate between the changes in the persistence and seasonal behavior with respect to domestic and foreign tourist arrivals and overnight stays. Second, with nearly 90% of the Croatian tourism sector tied to the seven counties along the Adriatic coast we investigate the differential regional impact on persistence and seasonal behavior. Our results indicate the disruption was much more prominent for foreign tourist arrivals and overnight stays relative to domestic tourist arrivals and overnight stays with respect to the increased persistence associated with the onset of the pandemic along with the seasonal autoregressive component reduced considerably.

Globalization, long memory, and real interest rate convergence: a historical perspective

This paper investigates whether the real interest rate parity (RIRP) is valid during the three waves of globalizations that occurred in the last 150 years (1870–1914, 1944–1971, 1989 to the present). If any, these periods should favor RIRP, since globalization is a process where economies and financial markets become increasingly integrated into a global economic system. In contrast to the existing literature, we model the departures from RIRP as a long-term memory process and apply fractional integration methods on a sample of real interest rate differentials of seven developed countries: France, Germany, Holland, Italy, Japan, Spain, and the UK across the three globalization waves paired against the USA. We compute impulse response functions (IRF) to gain further insight into the memory characteristics of the RIRP differential processes and provide half-life estimates. We find that deviations from RIRP are mean reverting, providing robust evidence of real interest rate convergence during the three globalization waves. We shed further light on financial and commodity market integration during the three globalization waves by assessing the memory properties of uncovered interest rate parity (UIP) and relative purchasing power parity (PPP) differential processes. We find that deviations from relative PPP and UIP are not always mean-reverting processes. RIRP, relative PPP, and UIP hold simultaneously only in 7 out of 21 cases;RIRP and UIP hold in 11 out of 21 cases;RIRP hold without the support of relative PPP and UIP in 3 out of 21 cases. Thus, the evidence in favor of real interest rate convergence appears to be driven more by UIP than relative PPP. All these results are, to the authors knowledge, new to the literature.

Pandemic episodes, CO2 emissions and global temperatures.

This paper deals with the relationship between the CO2 emissions and the global temperatures across the various pandemic episodes that have been taken place in the last 100 years. To carry out the analysis, first we conducted unit root tests finding evidence of nonstationary I(1) behavior, which means that a shift in time causes a change in the shape of distribution. However, due to the low statistical power of unit root tests, we also used a methodology based on long memory and fractional integration. Our results indicate that the emissions display very heterogeneous behavior in relation to the degree of persistence across pandemics. The temperatures are more homogeneous, finding values for the orders of integration of the series smaller than 1 in all cases, thus showing mean reverting behavior.

Unemployment persistence in Europe: evidence from the 27 EU countries.

This paper investigates unemployment persistence in the 27 EU member states by applying fractional integration methods to quarterly data (both seasonally adjusted and unadjusted) from 2000q1 to 2020q4. The obtained evidence points to high levels of persistence in all cases. With seasonally adjusted data, a small degree of mean reversion is found in the case of Belgium, Luxembourg and Malta, but this evidence disappears under the assumption of weakly correlated disturbances. More cases of mean reversion are found instead when analysing the unadjusted series. In particular, countries such as Belgium, France, Croatia, Italy, Luxembourg and Malta display orders of integration significantly lower than 1. In addition, significant negative time trends are found in the case of Bulgaria, Croatia, Malta and Romania, and a positive one for Luxembourg. Finally, the Covid-19 pandemic had mixed effects, with (seasonal) persistence increasing in some countries whilst decreasing in others and not changing in a minority of cases. On the whole, our results support the hysteresis hypothesis for the European economies.

Gender Diversity Index. Measuring persistence

This paper deals with the analysis of the Gender Diversity Index (GDI), which is an Index developed by Solactive AG and is calculated and distributed by this provider. The index tracks the performance of developed world companies that are successfully working towards gender diversity as part of their CSR (Corporate Social Responsibility) strategy, and we measure its degree of persistence by using fractional integration or I(d) techniques. Using daily data from 8 December 2010 until 16 December 2020, the results indicate that the series is highly persistent with an order of integration lower than, though very close to 1. However, an interesting result is obtained by estimating d recursively across subsamples. The differencing parameter moves around 0.92 until 23 March 2020, with the series displaying a very small degree of mean reversion behaviour until that date. After that period, however, we observe an increase in the estimate of d, which stabilizes around 0.97 after 5 May 2020, though now the series presents evidence of a lack of mean reversion, with the shock having a permanent effect on the series. Thus, it seems that the sanitary crisis due to Covid-19 has had a clear effect in the degree of persistence of the GDI data.

Persistence in Croatian tourism: The impact of COVID-19

This research note examines the change in the degree of persistence in the Croatian tourism indicators, foreign arrivals, and overnight stays, due to the COVID-19 pandemic using recursive estimation of a fractional integration model. The results indicate that the shock from the COVID-19 pandemic can be viewed as permanent in nature. The policy response to restore tourism to its original trend should consider whether such policies proceed as in the past with the promotion of the traditional tourism growth model or support the transformation toward a more sustainable tourism model.

Modelling stock market data in China: Crisis and Coronavirus.

Global financial markets experienced distinct collapses during the global financial crisis in 2008 and the COVID-19 pandemic in 2020, and similarity in the underlying nature is still a hot topic to be investigated. This paper investigates their degree of persistence in order to detect whether the shocks affecting them have temporary or permanent effects by examining the closing prices of the Shanghai and Shenzhen Composite Indices from 1991 to 2020. The results before the coronavirus indicate large degrees of persistence with shocks having permanent effects, while during the coronavirus the results indicate a mean reversion with shocks having temporary effects.