Pandemic-Related Financial Market Volatility Spillovers: Evidence from the Chinese COVID-19 Epicentre

Abstract

Utilising Chinese-developed data based on long-standing influenza indices, and the more recentlydeveloped coronavirus and face mask indices, we set out to test for the presence of volatility spillovers from Chinese financial markets upon a broad number of traditional financial assets during the outbreak of the COVID-19 pandemic. Such indices are used to specifically measure the performance of Chinese companies who are inherently involved in the R&D and production of materials and products used to mitigate and counteract the effects of influenza and coronavirus, therefore, such indices present a unique barometer of broad population-based sentiment relating to COVID-19 in comparison to traditional Chinese influenza. Within days of the formal announcement of the COVID-19 outbreak, results indicate exceptionally pronounced and persistent impacts of the coronavirus pandemic upon Chinese financial markets, compared to that of the traditional and longstanding influenza index. Further, in a novel finding to date, COVID-19 is found to have had a substantial effect on directional spillovers upon the Bitcoin market. Cryptocurrency-based confidence appears to have been instigated through government-developed education schemes, which are identified as one possible explanation for our results, which are found to remain robust across both data-frequency and methodological variation.

The influence of the COVID-19 pandemic on asset-price discovery: Testing the case of Chinese informational asymmetry

“…Secondly, while evidence of safe-haven and flight-to-safety behaviour is evident across traditional energy and precious metal markets such as Chinese oil and gold markets, results suggest that cryptocurrencies offered another platform through which wealth was stored during periods of extreme financial market volatility. This result supports the growing literature that has identified potential safe-haven properties in cryptocurrency during the extreme pandemic-related financial market stress ( Conlon, Corbet, & McGhee, 2020 ; Corbet, Hu, Hou, Larkin, & Oxley, 2020 ; Corbet, Hu, Hou, & Oxley, 2020 ; Yarovaya, Brzeszczynski, Goodell, Lucey, & Lau, 2020 ). This latter result, while supporting the views of cryptocurrency enthusiasts, will be of particular concern to policy-makers and regulators due to the large number of fundamental flaws that exist within these relatively juvenile financial products ( Corbet & Cumming, 2020 ; Corbet, Larkin, Lucey, Meegan, & Yarovaya, 2018 ; Corbet, Larkin, Lucey, & Yarovaya, 2020 ; Gandal, Hamrick, Moore, & Oberman, 2018 ; Griffin & Shams, 2018 ).…”

Stock market volatility and the COVID-19 reproductive number

“…The findings are consistent with Zaremba et al (2020) who show that government non-pharmaceutical interventions to significantly and robustly increased the volatility in international stock markets, and Zhang et al (2020) and Narayan et al (2021) who conclude that global risks in financial markets increased substantially in response to the pandemic, with individual reactions depending on the severity of the pandemic in each country. Studies such as Topcu and Gulal (2020) , Corbet et al (2021b) , Díaz and Henríquez (2021) and Pandey and Kumari (2021) reach similar conclusions.…”

The Impacts of the Infectious Disease Epidemic on the Permanent Volatility of Precious Metal and Crude Oil Futures Markets: A Long-Term Perspective

“…e outbreak of COVID-19 has caused huge losses in the global real economy and financial markets, especially in the commodity futures markets due to its direct impacts on both the demand and supply chain of commodities [1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17]. Crude oil markets are hit the hardest for the collapse in travelling and massive plant shutdowns arising from mitigation measures [7,11,14,16,[18][19][20][21].…”