Risk spillover effect of global financial markets in the context of novel coronavirus epidemic

Since the outbreak of COVID-19 pandemic, the financial markets of many countries have been impacted severely. In this context, based on the event study method and orthogonal decomposition method, this paper studies the impact of the novel coronavirus epidemic on the spillover effect of global financial risk, and further analyses the financial risk transmission channels of various countries. The results suggest that the novel coronavirus significantly increases the overall risk level of global financial markets, and exacerbates the contagion effects of financial risk through the global risk spillover network. In addition, the analysis of transmission channels reveals the source and direction of the financial risks in each country, manifesting as the unidirectional risk transmissions from developed countries to developing countries and the bidirectional risk contagion paths of countries with similar level of development. Therefore, facing the challenges of public health emergencies such as novel coronavirus epidemic, the major economies should strengthen multilateral cooperation and promote the coordination of macroeconomic policies to jointly defuse global systemic financial risk. © 2023 Informa UK Limited, trading as Taylor & Francis Group.

Financial stress spillover network across Asian countries in the context of COVID-19

Using the dynamic connectedness framework of Antonakakis et al. (2020), this paper explores the financial stress spillover characteristic across nine Asian countries during major economic, political and public health emergency events, especially during COVID-19. We first find a substantial increase in the intensity of total financial stress spillover across nine Asian countries during COVID-19. Second, there are clear differences in the financial stress spillover networks across Asian countries during different economic and political events. In particular, in the first three months after the outbreak of COVID-19, there was considerable month-to-month variation in the financial stress spillover network. Singapore and Japan are the major net transmitter and receiver of financial stress shocks, respectively, during all considered events. During COVID-19, China, as the first country to detect and contain COVID-19, is the strongest net financial stress shock receiver in March 2020, but transmitted net financial stress shocks in February 2020, when the epidemic in China is serious.

Geopolitical risk and the systemic risk in the commodity markets under the war in Ukraine

We evaluate the transmission of returns and volatility in the universe of commodities around the war in Ukraine. The total volatility spillover increases from 35% to 85%, exceeding the level seen during the pandemic. The role of commodities changes in both return and volatility spillover systems. Crude oil becomes a net transmitter of return spillovers whereas wheat and soybeans become net receivers of return spillovers. Silver, gold, copper, platinum, aluminium, and sugar become net transmitters of volatility. Geopolitical risk Granger causes the spillover indices. High levels of return and volatility spillovers are associated with high levels of geopolitical risk.

How do stock price indices absorb the COVID-19 pandemic shocks?

To assess the resiliency of stock price indices during the COVID-19 crisis, this study provides a distinctive perspective;that is, we evaluate the ability of stock price indices to absorb COVID-19 shocks. We construct the measures of absorptive intensity and duration to identify a stock price’s absorptive capacity. We then employ the Granger causality test and a topology network approach to investigate the interactions of absorptivity among stock price indices. Our results show that stock price absorptivity varies over time and across countries and industries. The US and the Brazil stock indices have relatively high absorptive intensity while short duration. The health care industry shows distinctive trend in absorptive intensity from the other industries. The intensity of the non-cyclical industries such as utilities and consumer staples is high, while the cyclical industries such as banking, real estate, and energy have lower absorptive intensity. Moreover, the utilities, consumer staples, and financials industries are the main resiliency transmitters.