The time-varying spillover effect of China's stock market during the COVID-19 pandemic

Xueyong Liu; Zhihua Chen; Zhensong Chen; Yinhong Yao

doi:10.1016/j.physa.2022.127821

The time-varying spillover effect of China's stock market during the COVID-19 pandemic

Physica A. 2022 Oct 1:603:127821. doi: 10.1016/j.physa.2022.127821. Epub 2022 Jun 25.

Authors

Xueyong Liu¹, Zhihua Chen², Zhensong Chen¹, Yinhong Yao¹

Affiliations

¹ School of Management and Engineering, Capital University of Economics and Business, Beijing 100070, China.
² Belt and Road School, Beijing Normal University, Zhuhai 519087, China.

Abstract

The rapid spread of coronavirus (COVID-19) has a significant impact on the world economy, especially on the financial market. Investors are panicking about the future. This paper considers industry data and aims to investigate the impact of the pandemic on China's stock market. The Asymmetric-GARCH-BEKK model and complex network theory were combined to construct the interaction networks. From the perspective of spillover effect, we investigated the time varying co-movement during the pandemic. The results indicate that the outbreak of COVID-19 weakens the mean spillover, but enhances the volatility spillover among China's stock market. However, both mean spillover and volatility spillover decreased rapidly during the period of regular epidemic prevention and control. We also found that different industries have various sensitivity to the COVID-19 pandemic.

Keywords: Co-movement; Coronavirus; Financial networks; GARCH-BEKK model; Spillover effect.