Impacts of COVID-19 on financial markets: from the perspective of financial stress

ABSTRACT

This research analyzes the impacts of COVID-19 on financial markets from the perspective of financial stress. Effects on financial stress and its cross-border spillovers are investigated, respectively. The results show that the stress of a country’s financial system is positively correlated with the severity of COVID-19 pandemic the country experiences. Although the volatilities of financial stress increased slightly, the cross-border spillovers have increased significantly after the COVID-19 outbreak. We provide a new insight to the impacts of the COVID-19 and suggest a more prudent look at financial risk management.

KEYWORDS:

• COVID-19
• financial stress
• spillover
• GARCH

JEL CLASSIFICATION:

• C52
• E44
• G15

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [Grant nos. 71801201 and 72071186] and the National Social Science Fund of China [Grant nos. 18ZDA070 and 18BJY071].