Analysing the impacts of unscheduled news events on stock market contagion during the epidemic

Abstract

This paper investigates the impact of unscheduled news announcements on market contagion during the COVID-19 pandemic. Using co-exceedance of stock returns as a metric for market contagion effect, we assess the contribution of news releases from the US and China on the financial contagion of a representative group of global equity markets through a quantile analysis framework. The empirical results are mixed: news events originating in the US have a greater impact on market contagion compared to those originating in China, especially at lower quantiles. Stock markets respond asymmetrically to good news versus bad news, and the latter lead to a sharper common fall among the markets than the boost to the market caused by good news. We also find evidence that conditional variance and investor sentiment play some role in the spread of financial market crises, despite differences in extent and direction.

Rights

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. http://creativecommons.org/licenses/by/4.0/

Cite as

Downloadable citations

Identifiers

DOI

https://doi.org/10.1002/ijfe.2930

Repository URI

https://strathprints.strath.ac.uk/88168/