The Persistence of Financial Volatility After COVID-19

Abstract

This paper analyzes the long-term effects of COVID-19 on financial volatility. We estimate the long memory parameters before and after COVID-19 for the VIX and realized variances for several international markets. Our results show that volatility measures for most countries experienced increases in the degrees of memory following the pandemic. Moreover, several volatility measures became nonstationary, signaling the start of a period with higher and more persistent financial volatility. We show that these changes in the degrees of memory are statistically significant using a test for change in persistence.

Highlights

• Financial volatility measures increased in persistence following COVID-19.

• Tests for change of persistence reject the null of no change.

• Most volatility measures became nonstationary after the emergence of COVID-19.

• Results suggest that the pandemic affects the financial sector even in the long run.

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Recommended citation

Text

Vera-Valdés, J.E. (2022). “The Persistence of Financial Volatility After COVID-19.” Finance Research Letters. 44(102056). https://www.sciencedirect.com/science/article/pii/S1544612321001379

BibTex

@article{VERAVALDES2022,
title = {The Persistence of Financial Volatility After COVID-19},
journal = {Finance Research Letters},
volume = {44},
pages = {102056},
year = {2022},
issn = {1544-6123},
doi = {https://doi.org/10.1016/j.frl.2021.102056},
url = {https://www.sciencedirect.com/science/article/pii/S1544612321001379},
author = {Vera-Valdés, J.E.},
}