Return and volatility spillovers among global assets: Comparing health crisis with geopolitical crisis
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 connectedne...
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| Published in: | International review of economics & finance 2023-09, Vol.87, p.557-575 |
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| Main Authors: | , , , |
| Format: | Article |
| Language: | eng |
| Subjects: | |
| Online Access: | Get full text |
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| Summary: | 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.
•We examine the return and volatility spillovers between equities, commodities, and cryptocurrencies.•The Covid-19 and the Ukrainian war have a real impact on transmitting shocks..•The volatility spillovers in Asian markets persisted after geopolitical and health crises.•Gold is a safe haven for both health and geopolitical crisis.•Commodity markets are the main transmitter of shocks during the Ukrainian war. |
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| ISSN: | 1059-0560 1873-8036 |