Stock Market Volatility During and After the Covid-19 Pandemic: Academic Perspectives

The Covid-19 aroused severe fluctuations in global stock markets widely and rapidly, while there lacks sufficient studies concerning shock caused by the Covid-19 to stock markets systematically. Through systematic review, this research summarizes features of stock market volatility during and after the pandemic by covering general characteristics and spillovers effect of the volatility. Specifically, the coronavirus would lead to significant volatility of the stock market through various and complex approaches, including economic losses, investor sentiment and policies, and this volatility would change with the stage of the coronavirus. Inside the stock market, as centres of volatility contagion, industrial, consumption and energy sectors, would transmit risks due to high correlations between sectors with mechanism varying from stage to stage, but industries isolating risks still exist in the long term. Although research on volatility spillovers between financial submarkets particularly during the epidemic are limited, previous empirical studies reveal that stock, foreign exchange and bond markets would transmit risks to each other. Furthermore, the Covid-19 has promoted cross-border stock market risk contagion significantly. These arguments present a systematic view of shock aroused by the Covid-19 to risks of stock markets, providing directions for further research and assisting investors of capital markets in identifying and managing portfolio risks, especially under the background of severe public health crises. In particular, investors are suggested to realize dynamic changes of stock market volatility and its transmission inside and between various markets, increase proportion of stocks isolating risk, and diversify investment portfolio with safe-haven assets, such as gold.