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Measuring 25 years of global equity market co-movement using a time-varying spatial model

Thomas L.A. Heil, Franziska J. Peter and Philipp Prange

Journal of International Money and Finance, 2022, vol. 128, issue C

Abstract: We analyse global equity market co-movement over the period of the last 25 years using a dynamic spatial model. Based on a generalized autoregressive score model, we analyse the co-movement among global, European, American, and Asian equity markets during various crises including the Asian, global financial, and European sovereign debt crises, as well as the economic turmoil arising due to the current COVID-19 pandemic. Our results show an increase in the co-movement prior to the onset of the global financial crisis in 2008; a generally higher co-movement among European countries as compared to American and Asian-Pacific countries; while the highest level of co-movement was reached during the current pandemic. When accounting for time-varying variances, however, we find evidence for global contagion only during the COVID-19 pandemic which induced an economic downturn in the first quarter of 2020.

Keywords: Co-movement; Contagion; Stock markets; Crisis; COVID-19; GAS (search for similar items in EconPapers)
JEL-codes: C22 C31 G14 G15 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jimonfin.2022.102708

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