The Impact of COVID-19 Pandemic on the Financial Contagion among Turkey, US, and China Stock Markets

The Impact of COVID-19 Pandemic on the Financial Contagion among Turkey, US, and China Stock Markets

Ecenur UĞURLU YILDIRIM

Purpose – The aim of this study is to empirically examine the impact of COVID-19 on the dynamiccorrelation among the stock markets of Turkey, the United States, and China, and demonstrate theeffects of search-based investor attention and newspaper-based infectious disease equity marketvolatility on the correlation among these markets.Design/methodology/approach – In this study, VAR(1)-DCC-GARCH(1,1) methodology isemployed to examine the changes in the variances and dynamic correlations among markets afterthe outbreak of Covid-19. Then, least square regression analyses are done to examine the influencesof search-based sentiment and newspaper-based infectious disease equity market volatility on thecorrelations obtained from VAR(1)-DCC-GARCH(1,1) model.Findings – Findings of this study demonstrate that the integration of the China stock market withTurkey and the US markets diminishes after the outbreak of a pandemic, while the dynamiccorrelation between the US and Turkey stock markets does not change significantly after Covid-19.Moreover, we present that increase in the media coverage of the Covid-19 related equity marketvolatility and search-based sentiment have explanatory power on the correlation between Turkeyand US markets, especially after the Covid-19 is pronounced as a pandemic. Likewise, individualattention to Covid-19 negatively influences the correlation between Turkey and China.Discussion – This study presents that stock market integration is highly related to human health.Therefore, the results of this study offer inputs to investors and policymakers that can be used duringinfectious disease periods. Moreover, as public attention has a significant impact on theinternational stock market correlation, media coverages and information releases during lowfrequency, high severity events should be managed wisely.

2020

covid-19, dynamic conditional correlation, search-based attention

10.20491/isarder.2020.1006

Epidemiology and Health

Korean Society of Epidemiology

Business