Covid-19, Indicators, and the Stock Market – An Assessment of Indicators’ performance in relation to the Stock Market during Covid-19
Kiukkonen, Anton (2021)
Kiukkonen, Anton
2021
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2021061136686
https://urn.fi/URN:NBN:fi-fe2021061136686
Tiivistelmä
Market participants can use economic and financial indicators to predict and follow changes in the stock market. However, Covid-19 has caused uncertainty in the economy and financial markets since its spread. Additionally, the U.S. economy entered a recession in February 2020, and the stock market crashed in March 2020. During volatile times, reliable indicators are necessary for assisting market participants’ decision-making. Therefore, it is important to assess the indicators’ performance. Previous studies have provided information on indicators that are of reliable use. However, the findings from previous studies vary, depending on the characteristics of the economic situation.
The main aim of this study was to determine how indicators have been affected by Covid-19 and how well they have performed in relation to the stock market. Another aim was to assess if the indicators display information, that is, leading, coincident, or lagging in relation to the stock market indices. Furthermore, similar indicators were compared, and factors affecting the indicators during Covid-19 were described.
For the purpose of this study, nine indicators and two stock market indices were included. The indicators were assigned into the categories: macroeconomic, survey-based, and business cycle. Their performance was analyzed in relation to the development of the U.S. stock market indices S&P 500 index and DJIA. Monthly data with the time period of January 2019 to January 2020 were analyzed. Statistical analyzes, such as correlation, correlation significances, cross correlation, simple linear regression, and multiple linear regression, were performed to assess the indicators and their relationship with the stock indices.
The results showed that the stock market indices were leading the indicators. Hence, the results imply that indicators could not be reliably used in forecasting the development of the stock indices during the period from January 2019 to January 2021. Furthermore, the indicators were also affected directly and indirectly by regulations and lockdowns the U.S. government ordered to combat Covid-19.
The main aim of this study was to determine how indicators have been affected by Covid-19 and how well they have performed in relation to the stock market. Another aim was to assess if the indicators display information, that is, leading, coincident, or lagging in relation to the stock market indices. Furthermore, similar indicators were compared, and factors affecting the indicators during Covid-19 were described.
For the purpose of this study, nine indicators and two stock market indices were included. The indicators were assigned into the categories: macroeconomic, survey-based, and business cycle. Their performance was analyzed in relation to the development of the U.S. stock market indices S&P 500 index and DJIA. Monthly data with the time period of January 2019 to January 2020 were analyzed. Statistical analyzes, such as correlation, correlation significances, cross correlation, simple linear regression, and multiple linear regression, were performed to assess the indicators and their relationship with the stock indices.
The results showed that the stock market indices were leading the indicators. Hence, the results imply that indicators could not be reliably used in forecasting the development of the stock indices during the period from January 2019 to January 2021. Furthermore, the indicators were also affected directly and indirectly by regulations and lockdowns the U.S. government ordered to combat Covid-19.
Kokoelmat
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