Fitting of Impact of COVID-19 Pandemic on S&P 500 Index Using Random Walk

Abstract

The outbreak of COVID-19 pandemic can be viewed as a surprise for its scale and impact. However, this pandemic may not be considered as a purely random event, because it is developing from a local epidemic to a global pandemic under everyone’s eyes. Although COVID-19 pandemic negatively impacts the world economy, to everyone’s surprise, the US stock market recovers rapidly from its initial heavy loss. For the sake of modeling, it is interesting to use a random walk model to fit S&P 500 index, which is designed as the aim of current study. The results show that the random walk model can somewhat fit the S&P 500 index, the shorter the time scale is, the better the fitting is. The results therefore demonstrate it impossible to use a single random seed to fit the S&P 500 index from different time segments.