Investors' risk aversion and government policy responses to the COVID-19 pandemic

Do government policies during the COVID-19 pandemic affect investors' risk aversion, as proxied by the variance premium? To answer this question, this study examines data regarding government responses from thirteen countries. The empirical analysis indicates that government interventions were not able to substantially reduce variance risk premium in international equity markets. The results also show that economic support policies, containment, and closure regulations, and health system interventions all played a significant role in shaping equity variance risk price.