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Contagion risk in Equity Markets during Financial Crises and COVID-19: A comparison of developed and emerging markets

Author

Listed:
  • Paul-Francois Muzindutsi

    (University of KwaZulu-Natal, South Africa)

  • Akita Sheodin

    (University of KwaZulu-Natal, South Africa)

  • Joshua Moodley

    (University of KwaZulu-Natal, South Africa)

  • Khmera Moodley

    (University of KwaZulu-Natal, South Africa)

  • Mayuri Naidoo

    (University of KwaZulu-Natal, South Africa)

  • Purusha Ramjiyavan

    (University of KwaZulu-Natal, South Africa)

  • Rinay Moonsamy

    (University of KwaZulu-Natal, South Africa)

  • Tiffany Atalia Pillay

    (University of KwaZulu-Natal, South Africa)

  • Fikile Dube

    (University of the Western Cape, South Africa)

Abstract

This study compared the impact of the Global Financial Crisis (GFC) and the COVID-19 pandemic on financial market contagion between developed and emerging markets. A DCC-GARCH model was employed to test the contagion effects of developed and emerging markets using weekly returns for the S&P 500 (US), FTSE-100 (UK), ASX 200 (AUS), IBOVESPA (BRA), BSE SENSEX (IND) and BVM IPC (MEX). The results showed that there was a persuasive case made for the integration of markets for efficient financial systems. However, a crisis occurring in one market holds significant repercussions for any of the connected markets. The findings show that the COVID-19 pandemic affected all the markets more severely than the GFC and contagion effects were more pronounced in emerging markets than in developed markets during the GFC and the pandemic. Consequently, policy makers in emerging markets should implement policies that reduce external vulnerabilities and improve their markets’ stability to reduce the impact of contagion.

Suggested Citation

  • Paul-Francois Muzindutsi & Akita Sheodin & Joshua Moodley & Khmera Moodley & Mayuri Naidoo & Purusha Ramjiyavan & Rinay Moonsamy & Tiffany Atalia Pillay & Fikile Dube, 2022. "Contagion risk in Equity Markets during Financial Crises and COVID-19: A comparison of developed and emerging markets," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(4), pages 615-629, December.
    • Handle: RePEc:aic:saebjn:v:69:y:2022:i:4:p:615-629:n:3
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    References listed on IDEAS

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    Cited by:

    1. Zwak-Cantoriu Maria-Cristina, 2023. "The Contagion of International Crises: Implications of Inflation and Investor Sentiment on Stock and Treasury bond Returns," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 17(1), pages 1818-1838, July.

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