key: cord-0779688-5ym5iabq
authors: Khalfaoui, Rabeh; Nammouri, Hela; Labidi, Oussama; Ben Jabeur, Sami
title: Is the COVID-19 vaccine effective on the US financial market?
date: 2021-07-29
journal: Public Health
DOI: 10.1016/j.puhe.2021.07.026
sha: d95f282601e0d7b53ef14cb408ef60bb60148462
doc_id: 779688
cord_uid: 5ym5iabq

Objectives Coronavirus disease (COVID-19) is the most devastating pandemic that affected humanity and the world economy. This paper aims to study the time-varying connectedness between the COVID-19 vaccination, infection rate, and the case fatality ratio in the United States and the stock market returns. Study design We used COVID-19 daily confirmed number of infections, deaths, and vaccinations and the daily US stock market index return. Methods A multiple wavelet coherence approach was used to assess the co-movement of the US stock market with the COVID-19 vaccination, infection rate (INFR), and the case fatality ratio (CFR). Results The COVID-19 vaccination, infection rate, and case fatality ratio have a positive and significant influence on S&P 500 returns at the majority of business cycle frequencies with an in-phase relation. Conclusions The wavelet coherence analysis uncovers strong and significant connectedness between COVID-19 vaccination rate, and S&P 500 return. From an economic perspective, the US government should continue its intervention with their vaccination strategy, as it is beneficial for fighting the pandemic. This may lead to the recovery of the stock market as well as to the whole economy.

The global COVID-19 pandemic that began in early 2020 has had a tragic impact on humanity, and devastating effects on the whole economy and financial markets. As such, a growing body of literature has focused on the impact of the COVID pandemic on the financial markets 1 . Notably, many of these studies have investigated the impact that COVID-19-related infections and deaths have had on stock market performance 2 . They have shown that stock markets were significantly and negatively affected by the COVID-19 pandemic 3 .

Furthermore, it has been showed that the stock market response was more sensitive to the growth in the number of COVID-19-related infections than to the number of deaths 4 .

Healthcare systems worldwide remain stressed due to the continuous rise of COVID-19 cases.

In this context, it has reported that the health sector is the source of sectorial contagion during the COVID-19 outbreak 5 Our study is related to the literature on the effect of the resolution of a health crisis on stock price dynamics. Our main contribution consists of showing the co-movements between COVID-19 vaccination rate and the US stock market recovery. To the best of our knowledge, this is the first paper to examine the COVID-19 vaccination-stock price nexus. Our findings reveal that stock market dynamics are closely linked to investor sentiment and confidence in strategies to address the health crisis. Furthermore, we demonstrated a high time-frequency dynamic co-movement between S&P 500 returns and COVID-19 variables. Interestingly, the COVID-19 vaccination strongly causes S&P 500 returns at all business cycle frequencies and under normal market conditions.

In our study, we considered daily closing S&P 500 prices obtained from FactSet. We also used three datasets corresponding to COVID-19 pandemic, namely the number of daily We developed a measure on the impact of US mortality 6 ,, namely, the case fatality ratio.

To investigate the dependencies in the tails of the joint distribution for each pair of variables, we used the wavelet coherence (WC) 7 .

Looking at first at the Wavelet Power Spectrum (WPS), the scalogram of each time series, which reflects the power of the variance of each variable in time-frequency domain, is portrayed in Fig.1 . As per the Fig. 1(a) The heatmap of S&P 500-CFR pair in Fig.1 (e)-(g) shows many hot-colored (red, orange, and yellow) "islands", suggesting a significant strong coherence between S&P 500 return and CFR. For instance, in the second half of January 2021, and for the cycles with periodicities of 

This paper aims to study the time-varying connectedness between the COVID-19 vaccination, infection rate, and the case fatality ratio in the United States and the stock market returns. The findings of wavelet coherence analysis uncover strong and significant connectedness between S&P 500 return and COVID-19 vaccination rate, infection rate (INFR), and the case fatality ratio (CFR). Indeed, our findings are constructive for policymakers to determine the vaccination policy and its impact on the financial markets and the economy. There are some limitations in this research: this study was performed at the level of one nation, in the future, it would be worthwhile to examine data at the worldwide level rather than at the nation level if the vaccination data are available and reliable.

J o u r n a l P r e -p r o o f

Ethical approval Not required.

This work has not received any specific grant from funding agencies in the public, commercial or not-for-profit sectors.

COVID-19 and stock market volatility: An industry level analysis

Stock markets' reaction to COVID-19: Cases or fatalities? Research in International Business and Finance

COVID-19 and the United States financial markets' volatility

Freedom and stock market performance during Covid-19 outbreak

Co-movements in sector price indexes during the COVID-19 crisis: Evidence from the US

Case fatality: Rate, ratio, or risk? Epidemiology

Using wavelets to decompose the timefrequency effects of monetary policy

The authors declare no conflicts of interest.

The COVID-19 vaccination, infection rate, and case fatality ratio have a positive and significant influence on S&P 500 returns at the majority of business cycle frequencies with an in-phase relation.