The Dynamic Effects of COVID-19 and the March 2020 Crash on the Multifractality of NASDAQ Insurance Stock Markets

Abstract

Triggered by COVID-19, one of the most dramatic crashes in the stock market in history occurred in March 2020. The sharp reductions in NASDAQ insurance stock indexes were observed after the occurrence of COVID-19 and in March 2020. In this study, the NASDAQ insurance stock markets (including NASDAQ Insurance Index, Developed Markets Insurance Index, and Emerging Markets Insurance Index) and NASDAQ Composite Index are utilized. The “scissors difference” between the NASDAQ Insurance Index and NASDAQ Composite Index is observed. The dynamic effects of the COVID-19 epidemic and the March 2020 crash on the multifractality of four series are explored. Firstly, the apparent and intrinsic multifractality, the components of multifractality, and the dynamic effects of the COVID-19 epidemic on these indexes are analyzed. Secondly, the multifractal cross-correlation between the NASDAQ Insurance Index and NASDAQ Composite Index is investigated. The dynamic influence of the COVID-19 epidemic on the cross-correlation is examined. The multifractal analysis results reveal that four series both before and after the occurrence of COVID-19 have multifractal characteristics. The stronger multifractal characteristics and the greater multifractal degree are obtained after the occurrence of COVID-19. The intrinsic multifractality of the three indexes ascends largely after the occurrence of COVID-19. The multifractal cross-correlation analysis illustrates that the cross-correlation between two indexes before and after the occurrence of COVID-19 is multifractal. The stronger multifractal cross-correlations and greater multifractal degrees are shown. The contribution of the intrinsic multifractal cross-correlation increased after the occurrence of COVID-19.