Macroeconomic Variables and Stock Market Indices during the COVID-19 Pandemic: Evidence from USA and Canada

Using Pooled Ordinary Least Square (Pooled OLS) on a daily panel dataset from the US and Canada from January 22 to September 22, 2020, this study examines the impact of macroeconomic indicators impact on the stock market indices during the COVID-19 pandemic. We improved the interaction relationship of government action variables with the trend in COVID-19 affected and death cases in finding the reaction of stock market returns. We find that the industrial production and money supply significantly influence the stock market return during this pandemic. As there is a paucity of literature together with unclear findings, we improved that social distancing and government economic support significantly affect the stock market returns. Further, this study implies that the interaction of social distancing with the trend in COVID-19 affected cases reduces the adverse reaction of stock market returns during this pandemic. But the interaction of social distancing with the trend in COVID-19 death cases enters negative and significant, suggesting that social distancing action with the trend in death cases of COVID-19 doesn’t weaken the inverse reaction of stock market returns. During this pandemic period, this study can be a policy dialog for the government, policymakers, researchers, and regulatory bodies.