The impact of COVID-19 on the degree of dependence and structure of risk-return relationship: A quantile regression approach

This paper examines the impact of the novel coronavirus (COVID-19) on the degree and structure of risk-return dependence in the US. The results from quantile regression (QR) indicate a left-tailed asymmetric dependence structure of sectoral returns with market portfolio. Following the COVID-19 outbreak, degree of dependence among returns and market portfolio have increased in the higher quantiles. Further, the outbreak has converted left-tailed dependence into a right-tailed dependence. Interaction among Google Search Index for coronavirus (GSIC) and returns also examined. Findings reveal an asymmetric GSIC-return dependence that is significant in tails.