Volatility During the COVID-19 Pandemic

• 成果类型: Article; Early Access
• 署名作者: Berrada, Tony; Detemple, Jerome; Rindisbacher, Marcel
• 署名单位: University of Geneva; University of Geneva; Boston University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2024.04352
• 发表日期: 2025
• 关键词: volatility; Covid-19; SEIRD; Shelter-in-place; jumps; beliefs-dependent preferences; mitigation

摘要

We examine the impact of COVID-19 on market volatility in an equilibrium framework. The model combines beliefs-dependent preferences for economic dynamics and a stochastic Susceptible-Exposed-Infectious-Recovered-Deceased (SEIRD) model with unpredictable birth/vaccine events and mitigating policies for disease propagation. The estimated model explains the realized trajectories of the S&P 500 volatility and number of new cases and identifies the source and composition of the volatility spike while providing a good match for 25 unconditional moments of economic series. Beliefs dependence, in conjunction with real effects due to the short-term decline of the effective workforce early in the pandemic, is critical for this comprehensive explanation of short-and long-run properties. A model comparison study is performed. Out-of-sample volatility prediction exercises document that the good in-sample model fit for volatility and cases is not due to over-parametrization. The effects of alternative mitigation policies such as changes in contamination rate, shelter-in-place duration, and shelter-in-place compliance rate are examined. They document the tradeoff in number of cases and stock volatility during the pandemic, and the dominant role of unemployment news volatility.