Fitting of Impact of COVID-19 Pandemic on SP 500 Index Using Random Walk

ABSTRACT

The outbreak of COVID-19 pandemic can be viewed as a surprise for its scale and impact. However, this pandemic may not be considered as a purely random event, because it is developing from a local epidemic to a global pandemic under everyone's eyes. Although COVID-19 pandemic negatively impacts the world economy, to everyone's surprise, the US stock market recovers rapidly from its initial heavy loss. For the sake of modeling, it is interesting to use a random walk model to fit SP 500 index, which is designed as the aim of current study. The results show that the random walk model can somewhat fit the SP 500 index, the shorter the time scale is, the better the fitting is. The results therefore demonstrate it impossible to use a single random seed to fit the SP 500 index from different time segments. © 2020 IEEE.