Ruhr Economic Papers

Ruhr Economic Papers #859

COVID-19 and Financial Markets: Assessing the Impact of the Coronavirus on the Eurozone

by Paola D'Orazio and Maximilian W. Dirks

RUB, 07/2020, 9 S./p., 8 Euro, ISBN 978-3-86788-995-7 DOI: 10.4419/86788995



COVID-19 has quickly emerged as a novel risk, generating feverish behavior among investors, and posing unprecedented challenges for policymakers. The empirical analysis provides evidence for a significant negative effect on stock markets of COVID-19-related measures announced in the Euro Area from January 1st, 2020 to May 17th, 2020. Further negative effects are detected for movements in bond yields, EU volatility index, Google trends, and infection rates. Health measures have, instead, a significant positive effect, while fiscal policy announcements are not significant.

JEL-Classification: E44, G15

Keywords: Coronavirus; COVID-19; investor behavior; stock market volatility; containment policies; policy announcements; fiscal policy