Economic conditions may force individual and institutional investors to liquidate their stock holdings and deposit in other financial instruments. ![]() Determinants such as economic development, political stability, and shareholder protection affect the funds that will be shifted in the stock markets. Additionally, equity markets are essential barometers for the economies as stock prices can incorporate information arrivals and expectations of various market participants. The role of equity markets in price discovery and determination of true share values make them crucial platforms for all countries. In this study, we analyze the impact of the COVID-19 pandemic and the Global Financial Crisis (GFC) on stock markets from the perspective of financial contagion and compare the extent of exposures. The International Monetary Fund’s (IMF) World Economic Outlook (WEO) for 2020 forecasted global growth of -3.0% in April, -4.9% in June, and -4.4% in October. Due to the slowdown in the global economy, the West Texas Intermediate crude oil price declined to -$37. Although COVID-19 began as a viral outbreak, it also created a financial contagion in global markets. After that declaration, countries started implementing different measures to mitigate the spread of the virus, which had many social and economic effects. Initial reports of an outbreak started at the end of December 2020 in Wuhan, China, and The World Health Organization (WHO) declared COVID-19 as a pandemic on March 11, 2020. ![]() However, none of these outbreaks impacted the world as COVID-19 has. The world has faced many viral outbreaks recently the SARS-COV in 2003, MERS-COV in 2012 and Ebola in 2014. XU100.įunding: The author(s) received no specific funding for this work.Ĭompeting interests: The authors have declared that no competing interests exist. The data underlying the results presented in the study are available from Refinitiv Eikon Database ( ) Respective RIC codes of the data are as below Dow Jones Industrial Average. The authors had no special access privileges to the data others would not have. The authors accessed the data with their institution’s membership. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.ĭata Availability: The data employed in this study is owned by Refinitiv Eikon. Received: Accepted: DecemPublished: January 14, 2022Ĭopyright: © 2022 Gunay, Can. ![]() Trinidad Segovia, University of Almeria, SPAIN The results suggest the presence of strong co-movements of world stock markets with the US equity market, especially in periods of financial turmoil.Ĭitation: Gunay S, Can G (2022) The source of financial contagion and spillovers: An evaluation of the covid-19 pandemic and the global financial crisis. The study provides an extensive examination of the COVID-19 pandemic and the GFC in terms of financial contagion and volatility spillovers. Additionally, the results show that the COVID-19 pandemic induced a more severe contagious effect and risk transmission than the GFC. The propagation of shocks is considerably higher between developed economies compared to emerging markets. The test results show that although the outbreak’s origin was in China, the US stock market is the source of financial contagion and volatility spillovers during the pandemic, just as it was during the GFC. To further reveal the impact of these two crises, the statistical features of tranquil and crisis periods under different time intervals are also compared. The empirical investigation is conducted using the modified ICSS test, DCC-GARCH, and Diebold-Yilmaz connectedness analysis to examine financial contagion and volatility spillovers. This study investigates the reaction of stock markets to the Covid-19 pandemic and the Global Financial Crisis of 2008 (GFC) and compares their influence in terms of risk exposures.
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