Abstract
The COVID-19 pandemic causes a huge number of infections. The outbreak of COVID-19 has not only caused substantial healthcare impacts, but also affected the world economy and financial markets. In this paper, we study the effect of the COVID-19 pandemic on financial market connectedness and systemic risk. Specifically, we test dynamically whether the network density of pandemic networks constructed by the number of COVID-19 confirmed cases is a leading indicator of the financial network density and portfolio risk. Using rolling-window Granger-causality tests, we find strong evidence that the pandemic network density leads the financial network density and portfolio risk from February to April 2020. The findings suggest that the COVID-19 pandemic may exert significant impact on the systemic risk in financial markets. Copyright © 2021 The Author(s).
Original language | English |
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Pages (from-to) | 649-665 |
Journal | Asia-Pacific Financial Markets |
Volume | 28 |
Issue number | 4 |
Early online date | 14 Jun 2021 |
DOIs | |
Publication status | Published - Dec 2021 |
Citation
So, M. K. P., Chan, L. S. H., & Chu, A. M. Y. (2021). Financial network connectedness and systemic risk during the COVID-19 pandemic. Asia-Pacific Financial Markets, 28(4), 649-665. doi: 10.1007/s10690-021-09340-wKeywords
- Financial contagion
- Granger causality
- Network density
- Pandemic network
- Risk analytics