COVID-19 and stock market volatility: A time-varying perspective

This study explores the response of the US stock market volatility to the COVID-19 pandemic over the period January 03 - October 15, 2020. Unlike the results from a conventional approach which reveals the absence of Granger causality, the time-varying causality results indicate two episodes detected following the FED's policy announcements, suggesting an indirect volatility response. We also discover the response to COVID-19 information in which negative news affects volatility over a longer period than positive news. These findings confirm the importance of time-varying structure as well as the negativity bias. © 2021. All Rights Reserved.