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Contagion or interdependence? Evidence from Asian emerging stock markets in times of COVID-19 pandemic

Author

Listed:
  • Bhaskar Bagchi
  • Raktim Ghosh
  • Avijit Kanrar

Abstract

This study examines the presence of contagion effect along with interdependency between the stock markets of Asian emerging economies like China, India, South Korea, Indonesia, Hong Kong, and Thailand that are caused due to COVID-19 pandemic. The study employs an adjusted correlation coefficient along with the DCC-MGARCH model to capture the contagion effect or interdependency between Shanghai Composite and other select stock markets. Mild enhancement of short-run volatility (DCCα1) is found to be significant under the DCC framework during COVID-19 period only, although long-run volatility is insignificant in both periods. Contagion effect can be slightly traced in BSE Sensex, KOSPI, and SET 100 while market co-movement remains same for Hang Seng and JKSE Composite and thus they are interdependent with Shanghai Composite. Interestingly, adjusted correlation coefficients between Shanghai Composite and other stock markets increased substantially during COVID-19 period indicating the presence of high contagion effect amongst the markets.

Suggested Citation

  • Bhaskar Bagchi & Raktim Ghosh & Avijit Kanrar, 2023. "Contagion or interdependence? Evidence from Asian emerging stock markets in times of COVID-19 pandemic," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 28(2), pages 155-174.
    • Handle: RePEc:ids:gbusec:v:28:y:2023:i:2:p:155-174
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