 Did U.S. and Chinese investors respond differently to the exogenous shocks from COVID-19 and the war in Ukraine?Yongmin Zhang and Yiru Sun International Review of Financial Analysis, 2023, vol. 88, issue C Abstract: This paper investigates the U.S. and Chinese stock markets' long-run responses to COVID-19 and the Russia–Ukraine war, the main shocks that have recently battered the globalized economy. The investigation uses both static data analysis and ARMA-GARCH and DCC-GARCH dynamic risk models incorporating both events' impacts. Model fitting reveals opposite reactions of the two stock markets' long-run volatilities to the pandemic, but both volatilities have been enhanced by the war, with a much stronger reaction from the U.S. than from the Chinese market. Furthermore, the war has reduced the linkage between the two markets, while the pandemic has had no significant effect. The different responses of U.S. and Chinese investors may be attributed to the two countries' very different virus containment strategies, pandemic severities, and policy approaches to the geopolitical conflict. Our results have important practical implications for regulators' risk mitigation policy design and investors' cross-market hedging strategy development. Keywords: Long-run volatilities; Dynamics correlation; COVID-19, Russia-Ukraine war (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:88:y:2023:i:c:s1057521923002260 DOI: 10.1016/j.irfa.2023.102710 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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