Industry volatility and economic uncertainty due to the COVID-19 pandemic: Evidence from wavelet coherence analysis

Abstract

This study investigates the impact of economic uncertainty due to the coronavirus (COVID-19) pandemic on the industrial economy in the US in terms of the interdependence and causality relationship. We apply wavelet coherence analysis to economic policy uncertainty (EPU) data and monthly sector volatility of the S&P 500 index from January 2008 to May 2020. The results reveal that EPU in terms of COVID-19 has influenced the sector volatility more than the global financial crisis (GFC) for all sectors. Furthermore, EPU leads the volatility of all sectors during COVID-19 pandemic, while some sector's volatilities lead EPU during the GFC. © 2020 Elsevier Inc.