Examining the impact of coronavirus on stock markets: investigating the cointegration and transmission of shocks between China and the world's largest stock markets. (16th February 2021)

• Record Type: Journal Article
• Authors: Haq, Naveed Ul; Shirwani, Abid H.K.
• Is Part Of: International journal of business and emerging markets. Volume 13:Number 2(2021)
• Page Start: 206
• Page End: 232
• Publication Date: 2021-02-16
• Subjects: COVID-19 -- financial aspects of coronavirus -- stock markets -- cointegration -- vector error correction model -- vector error correction causality -- stock markets -- shocks; International business enterprises -- Developing countries -- Periodicals; Investments -- Developing countries -- Periodicals; Globalization -- Economic aspects -- Periodicals; 338.888172405
• Languages: English
• ISSNs: 1753-6219

Abstract

This study's focal point is to access the financial aspects of coronavirus on China and the world's largest stock markets by analysing the cointegration and the transmission of shocks from the Chinese stock market to the whole world. This study employs unit root test, Johansen cointegration test, vector error correction model, Granger causality test, variance decomposition and impulse response function test, to find the long-run and short-run relationship and transmission of shocks for the period from January 2012 to March 2020. Findings of the study observe the long-run relationship between stock markets. The short-run results reveal that the previous day's stock prices of Hong Kong and the US stock market show a positive relationship with China stock market. Granger causality results show only unidirectional long-run causality running from the UK, Hong Kong and Japan. Short-run causality results indicate the bidirectional causality among China and other major stock markets.