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COVID-19 Pandemic and Co-movement Dynamics Among American and European Stock Markets

In: Financial Transformations Beyond the COVID-19 Health Crisis

Author

Listed:
  • Abdelkader Derbali
  • Mohamed Bechir Chenguel
  • Lamia Jamel
  • Meriem Jouirou
  • Fathi Jouini

Abstract

This chapter presents a crucial perspective to the predictive capacity of confirmed cases and deaths from COVID-19 surprises in the US and publication announcements for the correlation between financial stock market indices during the period from August 1, 2019 to August 31, 2020 using the DCC-GARCH(1,1) specifications. We use a sample composed of two major financial stock market indices in the US (S&P500 and Dow Jones) and 10 European stock market indices. To capture the unexpected factor of the COVID-19 surprises in the US, we use the Kuttner’s (2001) methodology. From our empirical results, we present a considerable DCC between financial stock market indices in the US and Europe, especially in the epidemic of COVID-19. We confirm that the estimated DCC begins to react considerably more in the case of COVID-19 pandemic surprises than the period without the COVID-19 pandemic spread. Then, we prove that the COVID-19 pandemic has a short-term effect on the financial stock market indices of the selected countries. Additionally, we find that the influence of the COVID-19 pandemic on international financial stock markets has a bidirectional spillover effect between the US and chosen European countries. Finally, we confirm the financialization of European financial stock market indices.

Suggested Citation

  • Abdelkader Derbali & Mohamed Bechir Chenguel & Lamia Jamel & Meriem Jouirou & Fathi Jouini, 2022. "COVID-19 Pandemic and Co-movement Dynamics Among American and European Stock Markets," World Scientific Book Chapters, in: Sabri Boubaker & Duc Khuong Nguyen (ed.), Financial Transformations Beyond the COVID-19 Health Crisis, chapter 11, pages 309-346, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781800610781_0011
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    Keywords

    COVID19; Pandemic; Pandemic Outbreak; Health Crisis; Economics; Macroeconomics; Finance; Sustainable Finance; Financial Crisis; Financial Integration; Economic Integration; Global Financial Crisis; Financial Institutions; Corporate Finance; Corporate Governance; Board of Directors; ESG; Corporate Social Responsibility; Sustainable Finance; Stock Markets; Financial Markets; Stock Market Behaviour; Firm Liquidity; Emerging Markets; China; Financial Institutions; Money; Banks; Banking System; Banking Sector; Business Groups; Resilience; Safe Heaven; Gold; Oil; Peer-to-Peer Lending Market; Foreign Trading; Stock Market Volatility; Extreme Events;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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