Asymmetric impact of coronavirus news, fear index, oil price on United States equity market: the first study on Infectious Disease EMV index

Abstract

The first novel paper investigates the effect of the Coronavirus crisis (USCOVID-19), fear index, and oil price on the United States equity market price. Our study first time used the novel proxy of the fear index (Infectious Disease EMV index) developed by Baker et al. (2020). The recent paper collected the data from 21 January 2020 which is the start of novel coronavirus (COVID-19) in America (US) up till the 6 July 2021. The paper has used the linear model of Nonlinear Autoregressive distributed lag (NARDL) to confirm the causal factors (short-long run) of DJI. The result depicts that two out three exogenous (independent) variables USCOVID_19 and Infectious Disease EMV significantly negatively related to co-integrated with the United States equity market (DJI) in both positive and negative shocks except IDEMV negative shock are insignificant. While oil is significantly positively co-integrated with the DJI index in both positive and negative. In the case of long term co-integration all variables OIL, USCOVID_19, and Infectious Disease EMV are significantly co-integrated in case of positive shocks but insignificant in case of negative shocks. Our study is beneficial for individual and government investors by identify an important investment (Infectious Disease EMV index) when they want to diversify their portfolio. This incorporate the factor contagious Infectious Disease in EMV, so it is more helpful for sectoral investor when the measure asymmetric volatilities factors.