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Spillovers Between Euronext Stock Indices: The COVID-19 Effect

Author

Listed:
  • Luana Carneiro

    (ISCAP, Instituto Politécnico do Porto, 4465-004 S. Mamede Infesta, Portugal)

  • Luís Gomes

    (CEOS.PP, ISCAP, Instituto Politécnico do Porto, 4465-004 S. Mamede Infesta, Portugal)

  • Cristina Lopes

    (CEOS.PP, ISCAP, Instituto Politécnico do Porto, 4465-004 S. Mamede Infesta, Portugal)

  • Cláudia Pereira

    (CEOS.PP, ISCAP, Instituto Politécnico do Porto, 4465-004 S. Mamede Infesta, Portugal)

Abstract

The financial markets are highly influential and any change in the economy can be reflected in stock prices and thus have an impact on stock indices. The relationship between stock indices and the way they are affected by extreme phenomena is important for defining diversification strategies and analyzing market maturity. The purpose of this study is to examine the interdependence relationships between the main Euronext stock indices and any changes caused by an extreme event—the COVID-19 pandemic. Copula models are used to estimate the dependence relationships between stock indices pairs after estimating ARMA-GARCH models to remove the autoregressive and conditional heteroskedastic effects from the daily return time series. The financial interdependence structures show a symmetric relationship of influence between the indices, with the exception of the CAC40/ISEQ pair, where there was financial contagion. In the case of the AEX/OBX pair, the dynamics of dependence may have changed significantly in response to the pressure of the pandemic. On the other hand, the dominant influence of the CAC40 before and the AEX after the pandemic confirms that the size and age of these indices give them a benchmark position in the market. Finally, with the exception of the AEX/OBX and CAC40/ISEQ pairs, the interdependencies between the stock indices decreased from the pre- to the post-pandemic sub-period. This result suggests that the COVID-19 pandemic has weakened the correlation between the markets, making them more mature and independent, and less risky for investors.

Suggested Citation

  • Luana Carneiro & Luís Gomes & Cristina Lopes & Cláudia Pereira, 2025. "Spillovers Between Euronext Stock Indices: The COVID-19 Effect," IJFS, MDPI, vol. 13(2), pages 1-17, April.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:2:p:66-:d:1634995
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    References listed on IDEAS

    as
    1. Ahelegbey, Daniel Felix & Giudici, Paolo & Hashem, Shatha Qamhieh, 2021. "Network VAR models to measure financial contagion," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    2. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    3. Leonidas Sandoval Junior & Asher Mullokandov & Dror Y. Kenett, 2015. "Dependency Relations among International Stock Market Indices," JRFM, MDPI, vol. 8(2), pages 1-39, May.
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