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If worst comes to worst: Co-movement of global stock markets in the US-China trade war

Toan Huynh () and Tobias Burggraf

Economics and Business Letters, 2020, vol. 9, issue 1, 21-30

Abstract: This paper investigates the co-movement characteristics of global stock markets in the context of the US-China trade war. By applying a set of different trivariate Copulas, our results suggest that markets co-move symmetrically in the pre-trade war period, but exhibit negative downside movements and heavy tails during the trade war. Furthermore, we find evidence for left-tail dependency structures during that period. Most importantly, this study finds that the trade war poses a systematic risk on global markets, which potentially can trigger simultaneous market downside trends. Our results are robust across different European equity market indices.

Date: 2020
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