Dynamic Interdependence and Volatility Connectedness in China-Asean Stock, Cryptocurrency and Crude Oil Markets: New Evidence from COVID-19

29 Pages Posted: 29 Mar 2022

See all articles by Hongjun Zeng

Hongjun Zeng

College of Business, RMIT University

Abudulahil D. Ahmed

School of AISSC—RMIT University

Date Written: March 21, 2022

Abstract

This paper investigates the influence of the COVID-19 pandemic on the dependence and dynamic connectedness of cryptocurrencies, crude oil, developed markets, and China-ASEAN stock markets. We use the GARCH-EVT-Vine-Copula and DCC-GARCH connectedness approaches. Our findings indicate that extreme tail dependencies occur following COVID-19. This result is also supported by the Vine-Copula model, which is based on extreme value theory. Our results indicate that market portfolios with exposure to both the cryptocurrency and crude oil markets exhibit extreme down-tail correlation in the aftermath of the COVID-19 outbreak. Additionally, we discover that linkages between these markets were stronger during the COVID-19 epidemic than they were before the pandemic. However, in the Chinese equity and crude oil markets, they shifted from net transmitters to net receivers during the COVID-19 outbreak. Surprisingly, our findings show that investing in markets with a long track record of stability, such as the Singapore stock market, can result in somewhat more consistent investment returns in the case of an extreme occurrence.

Keywords: COVID; Stock market; Oil market; Cryptocurrency; Dependence; Dynamic connectedness

JEL Classification: G14; G15; G11; G28; F36

Suggested Citation

Zeng, Hongjun and Ahmed, Abudulahil D., Dynamic Interdependence and Volatility Connectedness in China-Asean Stock, Cryptocurrency and Crude Oil Markets: New Evidence from COVID-19 (March 21, 2022). Available at SSRN: https://ssrn.com/abstract=4067611 or http://dx.doi.org/10.2139/ssrn.4067611

Hongjun Zeng (Contact Author)

College of Business, RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

Abudulahil D. Ahmed

School of AISSC—RMIT University ( email )

Australia

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