Financial Contagion Between the Us and Emerging Markets: Covid-19 Pandemic Case

Abstract

To realise how crises are disseminated is relevant for policy makers and regulators in order to take appropriate measures to prevent or contain the propagation of crises. This study aims to analysis the financial contagion in the six main markets of Latin America (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and the USA, in the period 2015-2020. Different approaches have been undertaken to carry out this analysis in order to consider the following research question, namely whether: (i) the global pandemic covid19 has accentuated the contagion between Latin American financial markets and the US? The results of the autocorrelation tests are totally coincident with those obtained by the BDS test. The rejection of the null hypothesis, i.i.d., can be explained, among other factors, by the existence of autocorrelation or by the existence of heteroscedasticity in the stock market index series, in which case the rejection of the null hypothesis is explained by non-linear dependence on data, with the exception of the Argentine market. However, significant levels of contagion were expected to occur between these regional markets and the US as a result of the global pandemic (Covid-19), which did not happen. These results may indicate the implementation of efficient diversification strategies. The authors consider that the results achieved are relevance for investors who seek opportunities in these stock markets, as well as for policy makers to carry out institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

The Impact of Covid-19 on the Securities and Equity Markets of Portugal and Edp: An Econophysics Approach

“…The results are in line with the findings of the authors G.Sudha and V. Sornaganesh (2020), Lahmiri and Bekiros (2020), which indicate sharp declines in the international financial markets, resulting from the global pandemic . These findings are corroborated by authors Heliodoro, Dias, and Alexandre (2020), Dias, Heliodoro, Alexandre, and Vasco (2020), Dias, Heliodoro, Alexandre, Santos, and Farinha (2021, Dias and Pereira (2021) who evidence stock market crashes in the first quarter of 2020 due to the 2020 global pandemic. Source: Own elaboration.…”

“…Additionally, the coefficients of asymmetry and kurtosis are statistically different from those of a normal distribution, this evidence is corroborated by the Jarque-Bera test where the rejection of the null hypothesis is rejected with a significance of 1%. The authorsAlexandre, Dias, and Heliodoro (2020),Heliodoro et al (2020), Dias, Heliodoro, Alexandre, et al (2020), Dias, Heliodoro, Teixeira, and Godinho (2020,Dias and Pereira (2021) also show that the financial series do not follow normal distributions.…”

The Impact of Covid-19 on European Financial Markets: An Empirical Analysis

“…Most markets show structure breaks in February and March 2020. These results are validated by the authorsHeliodoro et al (2020,, that show significant structural breaks in financial markets due to the impact of the 2020 global pandemic.…”

“…If a given stock market is strongly linked to the stock market of another country, the financial stability of the first depends, in part, on the financial stability of the second. Thus, the occurrence of integration between markets can have significant implications for the international diversification of risk Heliodoro, 2020a, 2020b;Alexandre, Heliodoro, and Dias, 2019;Dias and Carvalho, 2020;Alexandre, 2020, 2019;Dias, Heliodoro, Alexandre, Santos, and Farinha, 2021;Vasco, 2020b, 2020a;Dias, Heliodoro, Teixeira, and Godinho, 2020;Dias, Pardal, Teixeira, and Machová, 2020;Dias and Pereira, 2021;Heliodoro, Dias, and Alexandre, 2020;Pardal, P., Dias, R., Šuleř, P., Teixeira, N., and Krulický, 2020).…”

Stock Market Efficiency in Africa: Evidence From Random Walk Hypothesis

“…If a given stock market is strongly linked to another country's stock market, the financial stability of the former depends in part on the financial stability of the second. For this reason, a close or strong link between markets increases the levels of vulnerability to external shocks and, consequently, influences the economic conditions and welfare levels of their respective countries, as well as the efficiency of the market itself (Alexandre, Heliodoro and Dias, 2019;Dias, da Silva and Dionysus, 2019;Alexandre, 2019, 2020;Alexandre, Dias and Heliodoro, 2020;Heliodoro et al , 2020Heliodoro et al , , 2020Heliodoro, Dias and Alexandre, 2020;Heliodoro, 2020, 2020;, 2020a, 2020bDias, Sparrow, et al , 2020) .…”