{
  "title": "COVID-19 Containment Measures and Expected Stock Volatility: High-Frequency Evidence from Selected Advanced Economies",
  "publication": "IMF Working Papers, June 4, 2021",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2021/06/04/covid-19-containment-measures-and-expected-stock-volatility-high-frequency-evidence-from-50229",
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  "summary": "We study the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies, using event studies with hand-collected minute-level data and panel regressions with daily data.",
  "sections": [
    {
      "heading": "Summary / Objective",
      "content": "- Study of the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies.\n- Uses event studies with hand-collected minute-level data and panel regressions with daily data.\n- Authors: Viral V. Acharya, Yang Liu, Yunhui Zhao.\n- Publication date: June 4, 2021."
    },
    {
      "heading": "Methods",
      "content": "- Event studies using minute-level (hand-collected) data to capture high-frequency market reactions to containment announcements.\n- Panel regressions using daily data to analyze broader patterns across countries and over time."
    },
    {
      "heading": "Key Findings",
      "content": "- Six-month-ahead volatility indices:\n  - Dropped following announcements of initial or re-imposed lockdowns.\n  - Did not drop significantly following the easing of lockdowns.\n- Three-month-ahead expected volatility:\n  - Patterns of decline following lockdown announcements are present but not as strong as for six-month-ahead indices.\n- One-month-ahead expected volatility:\n  - Generally absent patterns; no consistent decline following lockdown announcements.\n- Interpretation:\n  - Findings provide suggestive evidence for an intertemporal trade-off: although stringent containment measures cause short-term economic disruptions, they may reduce medium-term uncertainty (reflected in expected stock volatility) by boosting markets’ confidence that the outbreak would be under control more quickly."
    },
    {
      "heading": "Policy-Relevant Implications",
      "content": "- Stringent containment measures can reduce medium-term market uncertainty even if they introduce short-term disruptions.\n- Easing of lockdowns may not immediately reduce medium-term expected volatility; markets may not interpret easing as reducing uncertainty about outbreak control.\n- Consideration of intertemporal trade-offs is important when designing containment and reopening policies given financial market reactions.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2021/06/04/covid-19-containment-measures-and-expected-stock-volatility-high-frequency-evidence-from-50229"
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    "[Markdown version](/en/publications/wp/issues/2021/06/04/covid-19-containment-measures-and-expected-stock-volatility-high-frequency-evidence-from-50229/index.md)",
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    "Authors: Viral V. Acharya, Yang Liu, Yunhui Zhao",
    "Published: June 4, 2021",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513573502.001",
    "Study of the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies.",
    "Uses event studies with hand-collected minute-level data and panel regressions with daily data.",
    "Authors: Viral V. Acharya, Yang Liu, Yunhui Zhao.",
    "Publication date: June 4, 2021.",
    "Event studies using minute-level (hand-collected) data to capture high-frequency market reactions to containment announcements.",
    "Panel regressions using daily data to analyze broader patterns across countries and over time.",
    "Six-month-ahead volatility indices:",
    "Three-month-ahead expected volatility:",
    "One-month-ahead expected volatility:",
    "Interpretation:",
    "Stringent containment measures can reduce medium-term market uncertainty even if they introduce short-term disruptions.",
    "Easing of lockdowns may not immediately reduce medium-term expected volatility; markets may not interpret easing as reducing uncertainty about outbreak control.",
    "Consideration of intertemporal trade-offs is important when designing containment and reopening policies given financial market reactions.",
    "**Working Paper**"
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