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Risk spillovers in global financial markets: Evidence from the COVID-19 crisis

This paper aims to comprehensively investigate the dynamics of short-, medium- and long-term risk spillovers across the major financial markets in the context of COVID-19. Our main empirical findings are as follows. First, we find that the deterioration of the COVID-19 pandemic raised the risk of st...

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Detalles Bibliográficos
Autores principales: Fang, Yi, Shao, Zhiquan, Zhao, Yang
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier Inc. 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9634791/
http://dx.doi.org/10.1016/j.iref.2022.10.016
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author Fang, Yi
Shao, Zhiquan
Zhao, Yang
author_facet Fang, Yi
Shao, Zhiquan
Zhao, Yang
author_sort Fang, Yi
collection PubMed
description This paper aims to comprehensively investigate the dynamics of short-, medium- and long-term risk spillovers across the major financial markets in the context of COVID-19. Our main empirical findings are as follows. First, we find that the deterioration of the COVID-19 pandemic raised the risk of stock, bond, crude oil, and foreign exchange markets sequentially in the short term. Second, from the perspective of the medium and long term, the COVID-19 pandemic triggered substantial risk spillovers across financial markets, which is also highly correlated with the degree of investor panic. Third, we show that different markets played different roles in terms of risk transmission during the pandemic. Specifically, the stock and crude oil markets acted more as risk senders, the gold and foreign exchange markets acted more as risk receivers, and the bond market served as a transfer station of risk. Finally, we find that containment and health responses can effectively mitigate risk spillovers across markets in the short term, while expansionary fiscal policy can reduce them more effectively in the medium and long term. Our findings have important implications for policymakers and investors who aim to mitigate the adverse impact of the COVID-19 pandemic on financial markets.
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spelling pubmed-96347912022-11-04 Risk spillovers in global financial markets: Evidence from the COVID-19 crisis Fang, Yi Shao, Zhiquan Zhao, Yang International Review of Economics & Finance Article This paper aims to comprehensively investigate the dynamics of short-, medium- and long-term risk spillovers across the major financial markets in the context of COVID-19. Our main empirical findings are as follows. First, we find that the deterioration of the COVID-19 pandemic raised the risk of stock, bond, crude oil, and foreign exchange markets sequentially in the short term. Second, from the perspective of the medium and long term, the COVID-19 pandemic triggered substantial risk spillovers across financial markets, which is also highly correlated with the degree of investor panic. Third, we show that different markets played different roles in terms of risk transmission during the pandemic. Specifically, the stock and crude oil markets acted more as risk senders, the gold and foreign exchange markets acted more as risk receivers, and the bond market served as a transfer station of risk. Finally, we find that containment and health responses can effectively mitigate risk spillovers across markets in the short term, while expansionary fiscal policy can reduce them more effectively in the medium and long term. Our findings have important implications for policymakers and investors who aim to mitigate the adverse impact of the COVID-19 pandemic on financial markets. Elsevier Inc. 2023-01 2022-11-04 /pmc/articles/PMC9634791/ http://dx.doi.org/10.1016/j.iref.2022.10.016 Text en © 2022 Elsevier Inc. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Fang, Yi
Shao, Zhiquan
Zhao, Yang
Risk spillovers in global financial markets: Evidence from the COVID-19 crisis
title Risk spillovers in global financial markets: Evidence from the COVID-19 crisis
title_full Risk spillovers in global financial markets: Evidence from the COVID-19 crisis
title_fullStr Risk spillovers in global financial markets: Evidence from the COVID-19 crisis
title_full_unstemmed Risk spillovers in global financial markets: Evidence from the COVID-19 crisis
title_short Risk spillovers in global financial markets: Evidence from the COVID-19 crisis
title_sort risk spillovers in global financial markets: evidence from the covid-19 crisis
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9634791/
http://dx.doi.org/10.1016/j.iref.2022.10.016
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