The Covid-19 Pandemic and the Degree of Persistence of US Stock Prices and Bond Yields

Guglielmo Maria Caporale, Luis Gil-Alana and Carlos Poza

No 8976, CESifo Working Paper Series from CESifo

Abstract: This paper analyses the possible effects of the Covid-19 pandemic on the degree of persistence of US monthly stock prices and bond yields using fractional integration techniques. The model is estimated first over the period January 1966-December 2020 and then a recursive approach is taken to examine whether or not persistence has changed during the following pandemic period. We find that the unit root hypothesis cannot be rejected for stock prices while for bond yields the results differ depending on the maturity date and the specification of the error term. In general, bond yields appear to be more persistent, although there is evidence of mean reversion in case of 1-year yields under the assumption of autocorrelated errors. The recursive analysis shows no impact of the Covid-19 pandemic on the persistence of stock prices, whilst there is an increase in the case of both 10- and 1- year bond yields but not of their spread.

Keywords: stock market prices; US bonds; persistence; fractional integration; Covid-19 (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-fmk and nep-ore
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Journal Article: The COVID-19 pandemic and the degree of persistence of US stock prices and bond yields (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8976

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