Covid-19 pandemic and tail-dependency networks of financial assets
Trung Hai Le,
Duc Khuong Nguyen and
Finance Research Letters, 2021, vol. 38, issue C
This study provides evidence on the frequency-based dependency networks of various financial assets in the tails of return distributions given the extreme price movements under the exceptional circumstance of the Covid-19 pandemic, qualified by the IMF as the Great Lockdown. Our results from the quantile cross-spectral analysis and tail-dependency networks show increases in the network density in both lower and upper joint distributions of asset returns. Particularly, we observe an asymmetric impact of the Covid-19 because the left-tail dependencies become stronger and more prevalent than the right-tail dependencies. The cross-asset tail-dependency of equity, currency and commodity also increases considerably, especially in the left-tail, implying a higher degree of tail contagion effects. Meanwhile, Bitcoin and US Treasury bonds are disconnected from both tail-dependency networks, which suggests their safe-haven characteristics.
Keywords: Tail-dependency; Financial networks; Covid-19; Asymmetric effect (search for similar items in EconPapers)
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