Markov Regime Switching Analysis for the Pandemic and the Dynamics of German Market

Abstract

This paper deals with the impact of COVID-19 pandemic on the stock market. We focus on the link between the infected cases and the change of the stock market in Germany. We employ the Markov Regime Switching Analysis (MRSA) to expose the situations of COVID-19 pandemic, and the co-movement between the pandemic and the market. Through our empirical analysis, we find that MRSA works well to divide the whole time horizon into several intervals with different statistical properties, or different regime states.