Research on Co-movement Between China and USA Stock Market under the Impact of COVID-19

Research Article
Open access

Research on Co-movement Between China and USA Stock Market under the Impact of COVID-19

Qingyi Yan 1*
  • 1 Wuhan University    
  • *corresponding author 2020301171010@whu.edu.cn
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/23/20230360
AEMPS Vol.23
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-89-8
ISBN (Online): 978-1-915371-90-4

Abstract

The worldwide economic market has fluctuated wildly due to COVID-19, therefore revealing the co-movement of international stock markets should reduce its destructive force and shock. Based on the "Economic Basic Hypothesis" and "Market Contagion Hypothesis," this work uses VECM and GARCH models to examine international market volatility using the Shanghai Composite Index (SSEC), Shenzhen Composite Index (SZSE), and S&P 500 index. The total trading data of three indexes are divided into 2 periods, with September 01, 2019 as the cut-off point. The period 1 is from January 5, 2015 to August 30, 2019 and the period 2 is from September 3, 2019 to December 30, 2022. The study shows that: 1) During the COVID-19, the short-term return of both stock markets has declined and volatility has increased; 2) there is no reliable co-integration relationship between S&P 500, SSEC and SZSE which also declaims no long-run equilibrium between two markets; 3) before and during the COVID-19, the close to close return rate of America stock market guided the return rate of China stock market; 4) both S&P 500, SSEC shows an asymmetric effect and the leverage effect is distinct; 5) the co-movement was stronger when the rate of return was relatively high; 6) volatility spillover effect of China to USA stock market was significant.

Keywords:

stock market, co-movement, volatility spillover effect, dynamic correlation

Yan,Q. (2023). Research on Co-movement Between China and USA Stock Market under the Impact of COVID-19. Advances in Economics, Management and Political Sciences,23,102-111.
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References

[1]. McQueen,G.,V.VRoley.”Stock Price ,News ,and Business Condition”, Review of Financial Studies[J], 1993, 6,683-707

[2]. Silvio Contessia1, Pierangelo De Pace, Johanna L.Francisc.” The cyclical properties of disaggregated capital flows”,Journal of International Money and Finance[J],2010, 32, 528-555

[3]. Dong Xiuliang, Cao Fengqi. The Spillover effect of Domestic and foreign stock market volatility: An Empirical Study based on Multivariate GARCH Model [J]. Mathematical Statistics and Management, 2009,28 (06) : 1091-1099

[4]. Zhang Bing, Fan Zhi-zhen, Li Xin-dan. Research on the co-movement of Chinese and American stock markets [J]. Economic Research, 2010, 11:141-151

[5]. Rao Jianping, Wang bo, Tang Minghui. (2019). Research on the linkage between China and the US stock market before and after the trade war. Journal of Quantitative Economics, 36(04), 8-13.

[6]. Stelios D. Bekiros. (2014). Contagion, decoupling and the spillover effects of the US financial crisis: Evidence from the BRIC markets. International Review of Financial Analysis, 33, 58-69.

[7]. Kübra Akca, Serda Selin Ozturk. (2015). The Effect of 2008 Crisis on the Volatility Spillovers among Six Major Markets. International Review of Finance, 16(1), 169-178.

[8]. Yudong Wang, Zhiyuan Pan, Chongfeng Wu. (2018). Volatility spillover from the US to international stock markets: A heterogeneous volatility spillover GARCH model. Journal of Forecasting, 37(3), 385-400.

Cite this article

Yan,Q. (2023). Research on Co-movement Between China and USA Stock Market under the Impact of COVID-19. Advances in Economics, Management and Political Sciences,23,102-111.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-89-8(Print) / 978-1-915371-90-4(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.23
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. McQueen,G.,V.VRoley.”Stock Price ,News ,and Business Condition”, Review of Financial Studies[J], 1993, 6,683-707

[2]. Silvio Contessia1, Pierangelo De Pace, Johanna L.Francisc.” The cyclical properties of disaggregated capital flows”,Journal of International Money and Finance[J],2010, 32, 528-555

[3]. Dong Xiuliang, Cao Fengqi. The Spillover effect of Domestic and foreign stock market volatility: An Empirical Study based on Multivariate GARCH Model [J]. Mathematical Statistics and Management, 2009,28 (06) : 1091-1099

[4]. Zhang Bing, Fan Zhi-zhen, Li Xin-dan. Research on the co-movement of Chinese and American stock markets [J]. Economic Research, 2010, 11:141-151

[5]. Rao Jianping, Wang bo, Tang Minghui. (2019). Research on the linkage between China and the US stock market before and after the trade war. Journal of Quantitative Economics, 36(04), 8-13.

[6]. Stelios D. Bekiros. (2014). Contagion, decoupling and the spillover effects of the US financial crisis: Evidence from the BRIC markets. International Review of Financial Analysis, 33, 58-69.

[7]. Kübra Akca, Serda Selin Ozturk. (2015). The Effect of 2008 Crisis on the Volatility Spillovers among Six Major Markets. International Review of Finance, 16(1), 169-178.

[8]. Yudong Wang, Zhiyuan Pan, Chongfeng Wu. (2018). Volatility spillover from the US to international stock markets: A heterogeneous volatility spillover GARCH model. Journal of Forecasting, 37(3), 385-400.

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