Integration of financial markets during COVID-19: a dynamic correlation analysis on Euronext

ABSTRACT

This article investigates the reaction of integrated financial markets to the COVID-19 pandemic. Using a dynamic conditional correlation model on Euronext Stock Exchange, I find that the integration of financial markets can act as a buffer against negative shocks such as COVID-19. However, this benefit begins to fade as the number of deaths from COVID-19 increases. In this case, a negative relationship with the dynamic correlation is found in some pairs of member countries.

KEYWORDS:

• Stock exchange merger
• COVID-19
• Euronext
• dynamic conditional correlation

JEL CLASSIFICATION:

• F10
• F15
• F30
• G15

Disclosure statement

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

Supplementary material

Supplemental data for this article can be accessed here.

Notes

¹ OSLO Stock Exchange was not considered for having little information on its transactions under Euronext before COVID-19.

² See Table S1 in supplemental material.

³ Tables S3–S5 in supplemental material show the general and complete results of to estimate the Equation (2)(2) $+{\omega }_i{\hat{\delta }}_{iUS,t}+{\omega }_j{\hat{\delta }}_{jUS,t}+{\epsilon }_t;fori\ne j$(2) ..

Additional information

Funding

This work was supported by the The author would like to express their gratitude to Proyecto Código 032061EM, Dirección de Investigación, Científica y Tecnológica, Dicyt. Universidad de Santiago de Chile, USACH. [032061EM].