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Do COVID-19 Epidemic Explains the Dynamic Conditional Correlation between China’s Stock Market Index and International Stock Market Indices?

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  • Abdelkader Derbali
  • Kamel Naoui
  • Mounir Ben Sassi
  • Mohamed Marouen Amiri

Abstract

This study presents an important view to the predictive capacity of COVID-19 for the correlation between Chinese stock market and 9 international stock market in Asia, Europe, and North America regions. In this paper, we try to investigate the spillover impacts of China’s stock market on the selected stock markets using an econometric methodology based on DCC-GARCH models during the period from May 01, 2019 to May 30, 2020. Our results show a strong significant DCC among China’s stock market index and selected international stock market indices especially in the outbreak of COVID-19. We find that the results related to the degree of the persistence of volatility, are sensitive to the existence of the COVID-19 surprises into the DCC-GARCH (1) model. We remark that that COVID-19 has a short-term impact on international stock market indices volatilities. Finally, we can conclude that COVID-19 explain the spillover impacts of China’s stock market index on selected countries using DCC-GARCH models. This paper gives an important framework to the investors to choose their portfolios in the financial markets especially in the crisis period. This paper contributes to the literature on assessing the impact of COVID-19 confirmed cases surprises on the correlation between China’s stock market index and selected international stock market in Asia, Europe, and North America regions.

Suggested Citation

  • Abdelkader Derbali & Kamel Naoui & Mounir Ben Sassi & Mohamed Marouen Amiri, 2022. "Do COVID-19 Epidemic Explains the Dynamic Conditional Correlation between China’s Stock Market Index and International Stock Market Indices?," Chinese Economy, Taylor & Francis Journals, vol. 55(3), pages 227-242, May.
    • Handle: RePEc:mes:chinec:v:55:y:2022:i:3:p:227-242
    DOI: 10.1080/10971475.2021.1958453
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