Learning from SARS: Return and volatility connectedness in COVID-19

https://doi.org/10.1016/j.frl.2020.101796Get rights and content

Highlights

  • We examine the impact of COVID-19 on stock return and volatility connectedness.

  • We assess if connectedness measures behave differently for countries with SARS 2003 experience.

  • Both stock return and volatility connectedness increase across the phases of the COVID-19.

  • Both connectedness is more pronounced as the severity of the pandemic builds up.

  • The degree of connectedness is lower in countries with SARS 2003 death experience.

Abstract

Using a sample of the G20 countries, we examine the impact of COVID-19 on stock return and volatility connectedness, and whether the connectedness measures behave differently for countries with SARS 2003 experience. We find that both stock return and volatility connectedness increase across the phases of the COVID-19 pandemic which is more pronounced as the severity of the pandemic builds up. However, the degree of connectedness is significantly lower in countries with SARS 2003 death experience. Our results are robust to different measures of COVID-19 severity and controlling for a number of cross-country differences in economic development.

JEL classification

G13

Keywords

COVID-19
SARS 2003
Spillover
Volatility connectedness
Return connectedness

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