Study Volatility and Volatility Spillover Effect by Comparison of Financial Markets Performance Between China, Us and Romania Under Covid-19
This study investigates the effect of economic policy uncertainty (EPU) and official announcements regarding new cases of infection and death ratio from (COVID-19) on the financial markets volatility index (VIX) in China, Romanian, and the US. Our sample covers the period January 22, 2020 – April 30, 2020. And study the effect of volatility spillover of stock returns among the stock markets of China, Romanian, and the US. BEKK-GARCH and DCC-GARCH models are used to test the volatility spillover of stock returns among the stock markets. to know the impact of COVID-19 on the volatility spillover, the sampling period is starting with January 01, 2018, up to April 30, 2020. The sample is split into two parts; Period1 (Pre-COVID-19, i.e., January 01, 2018, to January 21, 2020) and Period2 (Post-COVID-19, i.e., from January 22, 2020, to April 30, 2020). Our results show that COVID-19 new reported cases don't affect on financial volatility in China. In Romanian, COVID-19 contributes to a decrease in financial volatility if EPU is used as a control variable. In the US, COVID-19 contributes to an increase in financial volatility. This result changed if EPU is used as a control variable, the COVID-19 contributes to a decrease in financial volatility. The results for the BEKK-GARCH model for each pair of stock markets for pre-and-post- COVID-19 periods. The impacts of the past shocks are positive on the volatility of other stock markets. also, the impacts of past volatility effects are positive on the volatility of other stock markets. The results for DCC-GARCH for the pairs of stock markets during the pre and post COVID-19 periods. in all cases, the GARCH parameters are significant, indicating that the volatility transmission is bi-directional between the stock index pairs. Furthermore, the ARCH parameters are significant for all cases except the pairs of SSEC – BET in post-COVID-19 periods.
Keywords- COVID-19, VIX, EPU, Volatility spillover, BEKK-GARCH, DCC-GARCH