COVID-19 Pandemic and Co-movement Dynamics Among American and European Stock Markets

Abdelkader Derbali, Mohamed Bechir Chenguel, Lamia Jamel, Meriem Jouirou and Fathi Jouini

Chapter 11 in Financial Transformations Beyond the COVID-19 Health Crisis, 2022, pp 309-346 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter presents a crucial perspective to the predictive capacity of confirmed cases and deaths from COVID-19 surprises in the US and publication announcements for the correlation between financial stock market indices during the period from August 1, 2019 to August 31, 2020 using the DCC-GARCH(1,1) specifications. We use a sample composed of two major financial stock market indices in the US (S&P500 and Dow Jones) and 10 European stock market indices. To capture the unexpected factor of the COVID-19 surprises in the US, we use the Kuttner’s (2001) methodology. From our empirical results, we present a considerable DCC between financial stock market indices in the US and Europe, especially in the epidemic of COVID-19. We confirm that the estimated DCC begins to react considerably more in the case of COVID-19 pandemic surprises than the period without the COVID-19 pandemic spread. Then, we prove that the COVID-19 pandemic has a short-term effect on the financial stock market indices of the selected countries. Additionally, we find that the influence of the COVID-19 pandemic on international financial stock markets has a bidirectional spillover effect between the US and chosen European countries. Finally, we confirm the financialization of European financial stock market indices.

Keywords: COVID19; Pandemic; Pandemic Outbreak; Health Crisis; Economics; Macroeconomics; Finance; Sustainable Finance; Financial Crisis; Financial Integration; Economic Integration; Global Financial Crisis; Financial Institutions; Corporate Finance; Corporate Governance; Board of Directors; ESG; Corporate Social Responsibility; Sustainable Finance; Stock Markets; Financial Markets; Stock Market Behaviour; Firm Liquidity; Emerging Markets; China; Financial Institutions; Money; Banks; Banking System; Banking Sector; Business Groups; Resilience; Safe Heaven; Gold; Oil; Peer-to-Peer Lending Market; Foreign Trading; Stock Market Volatility; Extreme Events (search for similar items in EconPapers)
JEL-codes: F4 F62 G15 G17 G3 O16 (search for similar items in EconPapers)
Date: 2022
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