Analysis of the impact of COVID-19 pandemic on G20 stock markets |
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Institution: | 1. School of Business Administration, Northeastern University, No.195, Innovation Road, Hunnan New District, Shenyang, Liaoning 110167, China;2. School of Materials Science and Engineering, Northeastern University, No. 11, Lane 3, Wenhua Road, Heping District, Shenyang City, Liaoning Province 110819, China |
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Abstract: | We examine the impact of the COVID-19 pandemic on G20 stock markets from multiple perspectives. To measure the impact of COVID-19 on cross-market linkages and deeply explore the dynamic evolution of risk transmission relations and paths among G20 stock markets, we statically and dynamically measure total, net, and pairwise volatility connectedness among G20 stock markets based on the DY approach by Diebold and Yilmaz (2012, 2014). The results indicate that the total volatility connectedness among G20 stock markets increases significantly during the COVID-19 crisis, moreover, the volatility connectedness display dynamic evolution characteristics during different periods of the COVID-19 pandemic. Besides, we also find that the developed markets are the main spillover transmitters while the emerging markets are the main spillover receivers. Furthermore, to capture the impact of COVID-19 on the volatility spillovers of G20 stock markets, we individually apply the spatial econometrics methods to analyze both the direct and indirect effects of COVID-19 on the stock markets’ volatility spillovers based on the “volatility spillover network matrix” innovatively constructed in this paper. The empirical results suggest that stock markets react more strongly to the COVID-19 confirmed cases and cured cases than the death cases. In general, our study offers some reference for both the investors and policymakers to understand the impact of COVID-19 on global stock markets. |
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Keywords: | COVID-19 Volatility connectedness G20 stock markets Cross-market linkages C32 C51 C63 G15 F37 |
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