Stock market volatility from the Covid-19 pandemic: New evidence from the Asia-Pacific region

Responses from stock markets to the Covid-19 pandemic appear to change over time. Recent responses might differ as herd mentality in stock markets tends to become herd immunity to the pandemic. This study revisits the pandemic's effects on the Asia-Pacific countries' market volatility over the past 25 months. Primarily, we examine the changes of the impacts of the pandemic on volatility between the first pandemic period (2020) and the second period (January 2021–January 2022). Our findings indicate that implementing pandemic control measures helps reduce market volatility at the country and region levels. The effects of new Covid-19 cases and pandemic control measures on market volatility have been dramatically fading since 2021. The Toda-Yamamoto causality test and the panel impulse response functions from panel VAR estimation are also used for robustness analysis. Based on our findings, it appears that the current pandemic may no longer be blamed for stock market volatility in the Asia-Pacific region.