Spillovers between sovereign CDS and exchange rate markets: The role of market fear

This study described an empirical link between COVID-19 fear and stock market volatility. Studying COVID-19 fear with stock market volatility is crucial for planning adequate portfolio diversification in international financial markets. The study used AR (1) -GARCH (1,1) to measure stock market volatility associated with the COVID-19 pandemic. Our findings suggest that COVID-19 fear is the ultimate cause driving public attention and stock market volatility. The results demonstrate that stock market performance and GDP growth decreased significantly through average increases during the pandemic. Further, with a 1% increase in COVID-19 cases, the stock return and GDP decreased by 0.8%, 0.56%, respectively. However, GDP growth demonstrated a slight movement with stock exchange. Moreover, public attention to the attitude of buying or selling was highly dependent on the COVID-19 pandemic reported cases index, death index, and global fear index. Consequently, investment in the gold market, rather than in the stock market, is recommended. The study also suggests policy implications for key stakeholders.

show abstract

“…Simultaneously, a drop in oil prices is observed. Our findings are consistent with those of Huynh et al (2020) and Feng et al (2021).…”

Section: Covid-19 Fear Nexus With Stock Market Volatilitysupporting

confidence: 92%

The nexus between COVID-19 fear and stock market volatility

Chien

Kamran

et al. 2021

Economic Research-Ekonomska Istraživanja

142

View full text Add to dashboard Cite

show abstract

“…Simultaneously, a drop-in oil prices is observed. Our findings are consistent with those of Huynh et al (2020) and Feng et al (2020).…”

Section: Covid-19 Fear Nexus With Stock Market Volatilitysupporting

confidence: 92%

Assessing the Nexus Between Stock Market Performance and Covid-19: Evidence from Global Perspective

Latif

Bashir

Iqbal

et al. 2021

Preprint

View full text Add to dashboard Cite

This study described an empirical link between COVID-19 fear and stock market volatility. Studying COVID-19 fear with stock market volatility is crucial for planning adequate portfolio diversification in international financial markets. The study used AR (1) – GARCH (1,1) to measure stock market volatility associated with the COVID-19 pandemic. Our findings suggest that COVID-19 fear is the ultimate cause driving public attention and is a stock market volatility. The results demonstrate that stock market performance and GDP growth decreased significantly through average increases during the pandemic. Further, a 1% increase in COVID-19 cases the stock return and GDP decrease with a 0.8%, 0.56%, respectively. However, GDP growth demonstrated a slight movement with stock exchange. Moreover, public attention to the attitude of buying or selling was highly dependent on the COVID-19 pandemic reported cases index, death index, and global fear index. Consequently, investment in the gold market, rather than in the stock market, is recommended. The study also suggests policy implications for key stakeholders.

show abstract

“…The findings of the whole period are in line with Gök (2020), who found a bidirectional causal relationship between currency basket and CDS spreads and oneway causal linkage from interest rates to currency basket and from CDS spreads to interest rates in Turkey. Moreover, the results partly reconcile the findings of Feng et al (2020) who report a linear spillover effect in both directions between CDS and currency markets when accounting for the market fear variables during the COVID-19 period.…”

Section: Figure 3: Rolling Symmetric Causality Between Return Seriessupporting

confidence: 84%

“…Because, as stated before, this paper's latest data also covers the COVID-19 period. For instance, Feng et al (2020) suggest that the relation or spillovers between exchange rate and CDS spread have been bidirectional during COVID-19. However, before this pandemic, the authors also claim that the effect of the exchange rate on sovereign CDS spread was more forceful than the effect of CDS on the exchange rate.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

CDS, Faiz ve Döviz Kuru Arasındaki Nedensellik İlişkisinin Analizi: Granger Coherence Metodundan Yeni Kanıtlar

Gök

Kara

2021

Eskişehir Osmangazi Üniversitesi İktisadi Ve İdari Bilimler Dergisi

View full text Add to dashboard Cite

Bu çalışmada 2005 ve 2020 dönemi kapsamında haftalık ve aylık gözlemlerde CDS, faiz oranı ve USDTRY arasındaki ilişki incelenmiştir. Test sonuçlarına göre tüm değişkenler arasında pozitif yönlü bir ilişki bulunmuştur. Granger Coherence test sonucuna göre değişkenler arasında orta ve kısa döneme yoğunlaşan çift taraflı nedensellik sonucuna ulaşılmıştır. 37 pencere uzunluğundaki Boostraplı zamanla değişen nedensellik test bulgularına göre, değişkenler arasında hem kriz hem kriz dışı dönemlerde geçerli, ancak heterojen özellikler gösteren nedensellik bulunmuştur. Ayrıca, COVID-19 periyodunu içeren zaman aralığında, sadece faiz oranı ve döviz kuru arasında geçerli tek yönlü nedensellik bulgusuna rastlanmıştır. Bulgular hem yatırımcılar hem de politika yapıcılar için önemli sonuçlar doğurmaktadır.

show abstract

Spillovers between sovereign CDS and exchange rate markets: The role of market fear

Cited by 31 publications

References 64 publications

The nexus between COVID-19 fear and stock market volatility

The nexus between COVID-19 fear and stock market volatility

Assessing the Nexus Between Stock Market Performance and Covid-19: Evidence from Global Perspective

CDS, Faiz ve Döviz Kuru Arasındaki Nedensellik İlişkisinin Analizi: Granger Coherence Metodundan Yeni Kanıtlar

Contact Info

Product

Resources

About