Contagion Risk in Equity Markets During Financial Crises and COVID-19: A Comparison of Developed and Emerging Markets
Contagion Risk in Equity Markets During Financial Crises and COVID-19: A Comparison of Developed and Emerging Markets
Author(s): Paul-Francois Muzindutsi, Akita Sheodin, Joshua Moodley, Khmera Moodley, Mayuri Naidoo, Purusha Ramjiyavan, Rinay Moonsamy, Tiffany A. Pillay, Fikile DubeSubject(s): Methodology and research technology, Health and medicine and law, Financial Markets, Socio-Economic Research
Published by: Editura Universităţii »Alexandru Ioan Cuza« din Iaşi
Keywords: contagion; financial crisis; COVID-19; DCC-GARCH model; internationalization;
Summary/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.
Journal: Scientific Annals of Economics and Business
- Issue Year: 69/2022
- Issue No: 4
- Page Range: 615-629
- Page Count: 15
- Language: English
