Return and volatility spillovers among global assets: Comparing health crisis with geopolitical crisis

Muhammad Abubakr Naeem, Foued Hamouda, Sitara Karim, Samuel A. Vigne

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

Abstract

This study investigates the dynamic mechanism across equity, cryptocurrency, and commodity markets before and during health and geopolitical crisis (Covid-19 and the Ukrainian war). We apply the (TVP-VAR) based extended joint connectedness methodology, to understand return and volatility connectedness of financial markets for 2010–2023 period. The empirical results indicate that spillovers were particularly high during the Covid-19 and Russia-Ukraine war. First, health and geopolitical risks considerably impact the return and volatility system. Second, the value of total joint connectedness during the COVID-19 period was greater than during Russia-Ukraine war crisis. Also, evidence suggests that Commodity markets, received the highest shocks from other markets after Russia-Ukraine war and wheat was the main commodity receiving chocks from both health and geopolitical crisis. Our findings indicate that spillover channels differ depending on the type of crisis. Specifically, low-frequency components are the main transmission channels during the health crisis, whereas high-frequency components are the main transmission channels during the geopolitical crisis. Finally, results indicate that, cryptocurrency markets played some minor role in transmitting risks between markets. Our results are important in understanding how assets affect return and volatility spillover during geopolitical and health crises and are of particular importance to policymakers, market regulators, investors, and portfolio managers.

Original languageEnglish
Pages (from-to)557-575
Number of pages19
JournalInternational Review of Economics and Finance
Volume87
DOIs
Publication statusPublished - Sept 2023

Keywords

  • Commodity markets
  • Cryptocurrency markets
  • Health crisis
  • TVP-VAR. Geopolitical risk
  • Volatility spillover
  • World equity markets

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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