Financial Network Connectedness and Systemic Risk During the COVID-19 Pandemic

So, Mike K. P.; Chan, Lupe S. H.; Chu, Amanda M. Y.

doi:10.1007/s10690-021-09340-w

Cited by 26 publications

(19 citation statements)

References 19 publications

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“…The Diebold and Yilmaz (11,31,32) volatility spillover measure has also been widely used (33)(34)(35). Some scholars have introduced the network to describe the risk spillover connections among financial markets (36,37), and GARCH and its extended models have also been adopted to some extent (7,38,39).…”

Section: Literature Reviewmentioning

confidence: 99%

COVID-19 Shock and the Time-Varying Volatility Spillovers Among the Energy and Precious Metals Markets: Evidence From A DCC-GARCH-CONNECTEDNESS Approach

Tan

Wang

et al. 2022

Front. Public Health

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The outbreak of the COVID-19 epidemic intensified the volatility of commodity markets (the energy and precious metals markets), which created a significant negative impact on the volatility spillovers among these markets. It may also have triggered a new volatility risk contagion. In this paper, we introduce the DCC-GARCH-CONNECTEDNESS approach to explore the volatility spillover level and multi-level spillover structure characteristics among the commodity markets before and during the COVID-19 epidemic in order to clarify the new volatility risk contagion patterns across the markets. The results implied several conclusions. (i) The COVID-19 epidemic has significantly improved the total volatility spillover level of the energy and precious metals markets and has enhanced the risk connectivity among the markets. (ii) The COVID-19 epidemic has amplified the volatility of the crude oil market, making it the main volatility spillover market, namely the source of volatility risk contagion. (iii) The COVID-19 epidemic outbreak enhanced the external risk absorption capacity of the natural gas and silver markets, and the absorption level of the external volatility spillover improved significantly. Furthermore, the risk absorption capacity of the gold market weakened, while the gold market has remained the endpoint of external volatility risk during the epidemic and has acted as a risk stabilizer. (iv) The volatility spillover among markets has clear time-varying characteristics and a positive connectedness with the severity of the COVID-19 epidemic. As the severity of the COVID-19 epidemic increases, the volatility risk connectivity among the markets rapidly increases.

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Section: Literature Reviewmentioning

confidence: 99%

COVID-19 Shock and the Time-Varying Volatility Spillovers Among the Energy and Precious Metals Markets: Evidence From A DCC-GARCH-CONNECTEDNESS Approach

Tan

Wang

et al. 2022

Front. Public Health

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“…According to the survey of the COVID-19 literature developed by Yarovaya et al (2020), the term 'connectedness' tends to be employed more frequently than 'contagion' or 'spillover effect' in the early literature on the financial effects of the COVID-19 pandemic. For example, So et al (2021) employed rolling-window Granger-causality tests to assess the causal linkages between the pandemic network connectedness and the financial network connectedness, showing the strong leading effect of the COVID-19 pandemic on the systemic risk in financial markets. However, the term 'contagion' has been used by Iwanicz-Dorozdowska et al (2021), who examined the financial contagion caused by various past crisis events and claimed that the COVID-19 pandemic has been the most widespread source of contagion.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

High-Frequency Connectedness between Bitcoin and Other Top-Traded Crypto Assets during the COVID-19 Crisis

2021

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“…So, Chu, and Chan ( 2021 ) present evidence of significant changes in financial market connectedness in the Hong Kong stock market during the early stage of COVID‐19. So, Chan, and Chu ( 2021 ) study the financial connectedness and systemic risk during the COVID‐19. In terms of social and financial anxiety, panic can spread faster than COVID‐19, especially when people have little knowledge of the pandemic (Depoux et al, 2020 ).…”

Section: Introductionmentioning

confidence: 99%

Stochastic actor‐oriented modelling of the impact of COVID‐19 on financial network evolution

Chu

Chan

2021

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The coronavirus disease 2019 (COVID‐19) pandemic has led to tremendous loss of human life and has severe social and economic impacts worldwide. The spread of the disease has also caused dramatic uncertainty in financial markets, especially in the early stages of the pandemic. In this paper, we adopt the stochastic actor‐oriented model (SAOM) to model dynamic/longitudinal financial networks with the covariates constructed from the network statistics of COVID‐19 dynamic pandemic networks. Our findings provide evidence that the transmission risk of the COVID‐19, measured in the transformed pandemic risk scores, is a main explanatory factor of financial network connectedness from March to May 2020. The pandemic statistics and transformed pandemic risk scores can give early signs of the intense connectedness of the financial markets in mid‐March 2020. We can make use of the SAOM approach to predict possible financial contagion using pandemic network statistics and transformed pandemic risk scores of the COVID‐19 and other pandemics.

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Financial Network Connectedness and Systemic Risk During the COVID-19 Pandemic

Cited by 26 publications

References 19 publications

COVID-19 Shock and the Time-Varying Volatility Spillovers Among the Energy and Precious Metals Markets: Evidence From A DCC-GARCH-CONNECTEDNESS Approach

COVID-19 Shock and the Time-Varying Volatility Spillovers Among the Energy and Precious Metals Markets: Evidence From A DCC-GARCH-CONNECTEDNESS Approach

High-Frequency Connectedness between Bitcoin and Other Top-Traded Crypto Assets during the COVID-19 Crisis

Stochastic actor‐oriented modelling of the impact of COVID‐19 on financial network evolution

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