Dynamics and Co-movements Between the COVID-19 Outbreak and the Stock Market in Latin American Countries: An...

The COVID-19 outbreak and the global uncertainty it causes produce an apparent panic in stock markets. Efforts to explain the economic spillover effects of COVID-19 can guide authorities to design a control policy against the financial impacts of pandemics. The paper examines the effects of the COVID-19 cases on the stock markets in the emerging Latin American countries of Argentina, Brazil, Chile, Colombia, Mexico, and Peru. The paper employs a continuous partial wavelet methodology to observe lead-lag relations between the daily variables of new COVID-19 cases and the stock market index for each Latin American country. Brazilian new COVID-19 cases led the Bovespa (BVSP) index to decline during the whole period, except February and June 2020, at one month-two month-frequency band. The wavelet and phase difference analyses indicate that, except for Brazil, COVID-19 cases did not affect the stock market indexes adversely during the whole sample period but did affect the stock exchange markets negatively during some sub-sample periods of the entire sample of each country. Dynamics of Latin American stock exchange markets in the short and long run can be explained by some other parameters of real and financial sectors and COVID-19 cases.