The role of the COVID-19 pandemic in US market volatility: Evidence from the VIX index

Nicholas Apergis, Ghulam Mustafa, Shafaq Malik

Research output: Contribution to journalArticlepeer-review


We examine how the implied volatility in the US financial market has been affected by the COVID-19 pandemic. We decompose the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) into two implied volatility conditions (i.e., low and high), and COVID-19 pandemic cases and deaths into two categories (i.e., low and high). Our novel quantile-on-quantile regression approach allows us to better examine the dynamic relationship between the COVID-19 pandemic and implied volatility. Our empirical results show that increased death rates tend to increase fear in the US financial market. Specifically. we find that high COVID-19 cases have a significant impact on implied volatility under high uncertainty conditions, but low COVID-19 cases appear to have no impact on implied volatility in the US market. Our findings offer support to the US policy response by the Federal Reserve Board and the government to limit the instability effect of the COVID-19 shock on the financial markets.
Original languageEnglish
Pages (from-to)27-35
JournalThe Quarterly Review of Economics and Finance
Early online date5 Mar 2023
Publication statusPublished - Jun 2023

Bibliographical note

© 2023 The Authors. Published by Elsevier Inc. on behalf of Board of Trustees of the University of Illinois. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
The version of record can be found here:


  • COVID-19
  • Forecasting
  • Quantile-on-quantile regression
  • VIX


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