Responses of the international bond markets to COVID-19 containment measures
Using an international sample during the COVID-19 outbreak, our study gives evidence that COVID-19 containment measures impact volatility in the international bond markets in different ways. We found that the positive effect of increasing new COVID-19 vaccinations markedly mitigates bond market volatility, while non-pharmaceutical government interventions resembling bad news increase volatility in bond markets. Besides this, changes in total COVID-19 cases and total deaths have co-movement and a significant relationship with this volatility. Our results imply that the investors' responses to the trigger of increased uncertainty seem to differ in a way that depends on bad or good news as a reflection of the possibility of pandemic control and the health of the economy. The mass vaccinations not only signal a lower probability of stringent government responses to the pandemic but also stabilize investors' behavior and mitigate compliance fears to open a period of safe living with coronavirus. Our findings are still robust when using alternative measures of independent variables and different forecasting models of conditional volatility.
Year of publication: |
2022
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Published in: |
Journal of Risk and Financial Management. - Basel : MDPI, ISSN 1911-8074. - Vol. 15.2022, 3, p. 1-11
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Publisher: |
Basel : MDPI |
Subject: | COVID-19 containment measures | government interventions | international bond market | vaccinations |
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