From pandemic to financial contagion: High-frequency risk metrics and Bayesian volatility analysis

Milivoje Davidovic

Finance Research Letters, 2021, vol. 42, issue C

Abstract: This is an event-based study that uses intraday (hourly) log returns to quantify Conditional Value-at-Risk (CVaR) and MCMC stochastic volatility before and during the Covid-19 pandemic (January 2019–June 2020) across the stock, commodity and cryptocurrency markets. The results indicate pandemic-induced risk exposure (expected shortfall), increasing volatility, and stronger cross-market integration. These effects might reduce the potential benefits of cross-market hedging and contribute to a global financial contagion, imposing an additional constraint on both the bank-level risk management strategy and macroprudential policy framework. Thus, the ongoing crisis can be amplified through the global financial spillovers.

Keywords: COVID-19 and Financial Markets; Conditional VaR; MCMC Volatility; JEL Code: G15; G18; G41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s154461232031727x

DOI: 10.1016/j.frl.2020.101913

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