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The global outbreak of COVID-19 in 2020 became unprecedented and sent shockwaves through financial markets worldwide. This study investigates the impact of the pandemic on the performance of the U.S. financial market from March 1, 2020, to April 14, 2022. Utilizing Bai and Perron’s (1998) least squares with breaks during this period. The study’s test findings validate the existence of seven structural changes, signifying the occurrence of eight effects of independent factors on the S&P 500 index. The empirical findings demonstrate a substantial influence of COVID-19 pandemic on the performance of financial markets. Specifically, the impact of the number of COVID-19 cases and new fatalities on financial market performance, exhibits variations in terms of direction, nature, depth, and level. Based on an analysis of the structural changes, it can be inferred that the initial period exhibits the most pronounced negative impact on the number of new COVID-19 cases. Subsequently, the direction and nature of this impact undergo a transformation from the second to the eighth periods. Specifically, the impact of the number of new COVID-19 cases becomes positive in the second, third, sixth, seventh, and eighth periods, gradually diminishing until it reaches its lowest levels of impact in the eighth period. The research further identifies a detrimental impact on the occurrence of new fatalities. However, the periods spanning from the third to the fifth period exhibit very modest levels of influence, which then transition into a beneficial effect during the fifth period. Moreover, the research reveals that the impact of mortality rates on the performance of the United States stock market was greater than that of COVID-19 cases across all periods linked to structural changes. Additionally, the exchange rate of the dollar has a consistent and favorable impact, and the real interest rate has a pronounced negative impact, which gradually reduces over time and eventually transitions into a positive value by the eighth period.
Djouadi et al. (Fri,) studied this question.