In this paper, we study the financial repercussions of COVID-19 and the effect of anti-epidemic measures on financial markets. By using a composite dataset containing stock market indices of 10 countries characterized by heterogeneous levels of contagion, the daily COVID-19 cases and the 108 more restrictive measures implemented to limit the virus from 31/12/2019 to 13/03/2020, we examine the emergence of financial systemic risk, its speed of propagation and the effectiveness of the policies implemented to curb it. On the one hand, the spread of contagion and its transmission on financial markets are investigated via a lagged cross-correlation analysis. Our results show the emergence of systemic risk characterized by a high speed of diffusion. On the other hand, an augmented AR(1)EGARCH(1,1) model is applied to examine the impact of anti-COVID-19 “policies on financial markets. We show that, regardless of the level of contagion, the restrictive measures are not able to contain the virus-induced investors panic in the first months of the epidemic.
The day after tomorrow: financial repercussions of {COVID}-19 on systemic risk
Rocco Caferra;Gabriele Tedeschi
2021-01-01
Abstract
In this paper, we study the financial repercussions of COVID-19 and the effect of anti-epidemic measures on financial markets. By using a composite dataset containing stock market indices of 10 countries characterized by heterogeneous levels of contagion, the daily COVID-19 cases and the 108 more restrictive measures implemented to limit the virus from 31/12/2019 to 13/03/2020, we examine the emergence of financial systemic risk, its speed of propagation and the effectiveness of the policies implemented to curb it. On the one hand, the spread of contagion and its transmission on financial markets are investigated via a lagged cross-correlation analysis. Our results show the emergence of systemic risk characterized by a high speed of diffusion. On the other hand, an augmented AR(1)EGARCH(1,1) model is applied to examine the impact of anti-COVID-19 “policies on financial markets. We show that, regardless of the level of contagion, the restrictive measures are not able to contain the virus-induced investors panic in the first months of the epidemic.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
