Co-movement of the Shanghai Stock Exchange and COVID-19 in China: Evidence from Wavelet Coherence

Abstract

This paper investigates the time-frequency dependency of the Shanghai Stock Exchange Composite Index (SSECI) and COVID-19 cases and deaths in China and around the world using the wavelet coherence approach. The findings indicate the following: (i) both domestic and global COVID-19 cases and death tolls have strong power for explaining the stock market index, and as expected, the effect of both domestic and global COVID-19 cases and death tolls on the stock market index is negative; (ii) we also captured a significant movement in the stock market index and the number of COVID-19 cases at different periods and different frequencies; the correlation between COVID-19 cases in China and the SSECI is stronger than the correlation between global COVID-19 cases and the SSECI. © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.