The causal relationship between the COVID-19, Delta and Omicron pandemic and the air transport industry: Evidence from China

This paper employs a novel multivariate panel Granger causality approach to examine the relationship between the 2019 coronavirus disease, Delta and Omicron pandemic and 14 air transport companies and airports during a certain time period, taking into account both the interdependence and heterogeneity among these air transport companies and airports. Empirical results show that 10 out of 14 air transport companies and airports have a oneway direction of Granger causality between pandemic shocks and stock returns, among which five air transport companies and airports have bilateral relationships. The results show that six air transport companies and airports are Granger "leading" the pandemic, arguing that the adjustment speed of expectations of exogenous shocks and the policies may account for the counterintuitive causal relationship which brings new insights into the heterogeneity in expectations.