Contagion risk in equity markets during financial crises and Covid-19: A comparison of developed and emerging markets
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Date
2022
Journal Title
Journal ISSN
Volume Title
Publisher
Alexandru Ioan Cuza University Press
Abstract
This study compared the impact of the Global Financial Crisis (GFC) and the COVID-19 pandemic on financial market contagion between developed and emerging markets. A DCC-GARCH model was employed to test the contagion effects of developed and emerging markets using weekly returns for the S&P 500 (US), FTSE-100 (UK), ASX 200 (AUS), IBOVESPA (BRA), BSE SENSEX (IND) and BVM IPC (MEX). The results show that there was a persuasive case made for the integration of markets for efficient financial systems. A crisis occurring in one market holds significant repercussions for any of the connected markets. The findings show that the COVID-19 pandemic affected all the markets more severely than the GFC and contagion effects were more pronounced in emerging markets than in developed markets during the GFC and the pandemic. Consequently, policymakers in emerging markets should implement policies that reduce external vulnerabilities and improve their markets’ stability to reduce the impact of contagion risk.
Description
Keywords
Covid-19, Public health, Global Financial Crisis (GFC), Labour market, Business sector
Citation
Muzindutsi, P. F. et al. (2022). Contagion risk in equity markets during financial crises and Covid-19: A comparison of developed and emerging markets. Scientific Annals of Economics and Business, 69(4), 2022, 615-629. 10.47743/saeb-2022-0026