ABSTRACT
In this paper, a spillover index measure is used to explore the extent of the connectedness among a set of six regional stock markets over nearly 8 years from 25 June 2012, to 11 May 2020. Results show that financial markets reacted in largely the same way to the significant economic uncertainty caused by COVID-19, and provide striking evidence of the disconnect between the American emerging market and the global financial markets.
Highlights
Analysis of the connectedness among a set of regional stock markets
Total return spillover index indicates a relatively high level of interdependence among the considered markets.
American emerging markets are disconnected from the world financial market.
Financial markets reacted similarly to the significant economic uncertainty implied by the COVID-19 pandemic.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 See Appendix A . for details on the composition of these regional indices. For more detail, we would refer the interested reader to msci.com.:
2 For example, the subprime crisis has shown to investors the necessity to study the performance of alternative markets, especially the emerging ones, for portfolio diversification purposes.
3 For policymakers, understanding the interdependences between regional stock markets is essential for financial stability considerations.
4 Positive (respectively negative) values of net spillovers correspond to a net transmitter (respectively receiver).
5 It should be noted that, after January 20th, search intensity on coronavirus on Google increased significantly.