Evidence of Stock Market Contagion during the COVID-19 Pandemic: A Wavelet-Copula-GARCH Approach
Huthaifa Alqaralleh () and
Alessandra Canepa ()
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Huthaifa Alqaralleh: Department of Economics, Business and Finance, Mutah University, Karak 61710, Jordan
JRFM, 2021, vol. 14, issue 7, 1-18
In this study, we propose a wavelet-copula-GARCH procedure to investigate the occurrence of cross-market linkages during the COVID-19 pandemic. To explore cross-market linkages, we distinguish between regular interdependence and pure contagion, and associate changes in the correlation between stock market returns at higher frequencies with contagion, whereas changes at lower frequencies are associated with interdependence that relates to spillovers of shocks resulting from the normal interdependence between markets. An empirical analysis undertaken on six major stock markets reveals evidence of long-run interdependence between the markets under consideration before the start of the COVID-19 pandemic in December 2019. However, after the health crisis began, strong evidence of pure contagion among stock markets was detected.
Keywords: stock market contagion; COVID-19 pandemic; wavelet decomposition; copula-GARCH models (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:14:y:2021:i:7:p:329-:d:594977
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