A crisis like no other?: financial market analogies of the COVID-19-cum-Ukraine war crisis

Abstract

In this paper, we examine the dynamic behaviour of the US stock market due to the subsequent impact of the COVID-19 outbreak and the war in Ukraine. To that end, we analyse daily data of Dow Jones Industrial Average returns from 2 January 1900 to 31 October 2022. Firstly, we identify past crisis episodes similar to the current situation. Then, we compare the volatility dynamics, variation-fluctuation correlation functions, and correlation with uncertainty indicators with those induced by the COVID-19 epidemic and the subsequent Russo-Ukrainian conflict. Our findings suggest that the consecutive occurrence of these unexpected events has had more severe adverse effects on the US stock market than those recorded in similar past episodes. Additionally, we found that the events are highly correlated with indicators of economic policy uncertainty and financial market fear.