Is the COVID-19 vaccine effective on the US financial market?

Khalfaoui, Rabeh; Nammouri, Hela; Labidi, Oussama; Ben Jabeur, Sami

Objectives Coronavirus disease (COVID-19) is the most devastating pandemic that affected humanity and the world economy. This paper aims to study the time-varying connectedness between the COVID-19 vaccination, infection rate, and the case fatality ratio in the United States and the stock market returns. Study design We used COVID-19 daily confirmed number of infections, deaths, and vaccinations and the daily US stock market index return. Methods A multiple wavelet coherence approach was used to assess the co-movement of the US stock market with the COVID-19 vaccination, infection rate (INFR), and the case fatality ratio (CFR). Results The COVID-19 vaccination, infection rate, and case fatality ratio have a positive and significant influence on S&P 500 returns at the majority of business cycle frequencies with an in-phase relation. Conclusions The wavelet coherence analysis uncovers strong and significant connectedness between COVID-19 vaccination rate, and S&P 500 return. From an economic perspective, the US government should continue its intervention with their vaccination strategy, as it is beneficial for fighting the pandemic. This may lead to the recovery of the stock market as well as to the whole economy.