Spillover Effects and Dynamic Connectedness in International Stock Markets: Evidence from the COVID-19 Pandemic in China
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Abstract
The Covid‑19 outbreak triggered extreme volatility in global financial markets. This paper examines the spillover effects between China’s stock market and international stock markets, using the dynamic connectedness index to measure these effects. Empirical results show that connectivity among international stock markets increased during the pandemic, with China’s stock market experiencing less spillover than European and advanced Asian markets. Additionally, we investigate the factors driving spillovers during this period, identifying the volatility index (VIX) as a key indicator, underscoring the role of global risk factors before, during, and after the pandemic. The case and vaccination rates also significantly influenced spillovers in international markets during the pandemic, though the impact of case rates on spillovers into China’s stock market was not significant. This reflects China’s robust pandemic response and economic policies, which effectively buffered its financial markets from global shocks.
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