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THE RELATIONSHIP BETWEEN COVID-19 AND THE FINANCIAL MARKET

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Original languageEnglish
Title of host publicationContributions to Economic Analysis
PublisherEmerald Group Holdings Ltd.
Pages71-84
Number of pages14
DOIs
Published1 Jun 2022

Publication series

NameContributions to Economic Analysis
Volume296
ISSN (Print)0573-8555

Bibliographical note

Publisher Copyright: © 2022 by Emerald Publishing Limited.

King's Authors

Abstract

This chapter discusses methodological challenges that may be faced by researchers interested in financial markets in relation to the COVID-19 pandemic. In particular, we focus on the behaviour of investors and consider three aspects that affect their investment decision process, namely comovement, cross-sectional asset pricing, and out-of-sample forecasting. We argue that, in relation to the pandemic, relevant financial time series such as asset returns exhibit nonlinear dynamics, which should be suitably incorporated within appropriate methodological tools. We discuss possible existing approaches that ensure that those nonlinearities are properly accounted for. Finally, possible areas of future research are touched upon.

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