Build resilience to overcome panic? Examining the global capital market during the COVID-19 pandemic

Using stock indexes from 56 countries/regions and sovereign bond indexes from 57 countries during 2019/12/31 to 2021/12/31, we investigate the global market reactions to the COVID-19 pandemic after considering the resilience of supply chain and logistics. Both stock and bond markets have dropped significantly during the pandemic period; however, such a pandemicinduced drop in stock and bond markets becomes weaker for countries/regions with resilient supply chain and better logistics performance. Such effects are stronger when there is no COVID19 vaccine and government policy responses to COVID-19 spread becomes stringent. A long-short portfolio of the stock and bond indexes from the countries/regions with the best and worst supply chain and logistics can generate significant abnormal returns.

Automated summary

Using stock and bond indexes from various countries, this study examines the global market reactions to the COVID-19 pandemic, taking into account the resilience of supply chain and logistics. The results show that both stock and bond markets experienced significant drops during the pandemic, but the magnitude of the drop is weaker for countries with resilient supply chains and better logistics. This effect is more pronounced in the absence of COVID-19 vaccine and when government responses are stringent. Additionally, a long-short portfolio strategy based on the best and worst supply chain and logistics performers generates significant abnormal returns.