Spillover of fear among the US and BRICS equity markets during the COVID-19 crisis and the Russo-Ukrainian conflict

Abstract

This study examines volatility contagion between the US and five BRICS stock markets during the COVID-19 pandemic and the Russo-Ukrainian crisis. We first use the Markov-switching dynamic regression method to endogenously identify various phases of market evolution. Then, we employ a dynamic conditional correlation process to uncover time-varying volatility spillovers relying on the implied volatility induced by daily changes in the investigated markets. Empirical results indicate that market spillover during the two crises presents quite different scenarios. The US has a more significant and persistent contagion effect on the BRICS markets during COVID-19. However, only a short-lived and pulse-like market response is detected in the initial stage of the Russo-Ukrainian crisis, and the volatility interdependency structures do not follow a specific pattern across all implied volatility pairs.

Rights

http://creativecommons.org/licenses/by/4.0/

Cite as

Downloadable citations

Identifiers

DOI

https://doi.org/10.1016/j.najef.2024.102308

Repository URI

https://strathprints.strath.ac.uk/91143/