4.5 Article

Time-varying multivariate causality among infectious disease pandemic and emerging financial markets: the case of the Latin American stock and exchange markets

Journal

APPLIED ECONOMICS
Volume 54, Issue 34, Pages 3924-3932

Publisher

ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/00036846.2021.2018127

Keywords

DCC GARCH; volatility estimation; EMV-ID; COVID-19; multivariate causality; Latin American financial markets

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The study found that the Infectious Disease Equity Market Volatility Tracker (EMV-ID) has an impact on the volatility of Latin American stock and exchange markets, highlighting the importance of this new indicator in financial market analysis. The results are consistent with evidence from other research findings.
The purpose of this article is to study the unidirectional causality from the Infectious Disease Equity Market Volatility Tracker (EMV-ID), towards the volatility of five of the most important Latin American stock and Exchange markets. For this, volatility is captured through the DCC-GARCH t-Copula method. In addition, the time-varying Granger multivariate causality test (TV-GC) and the classical Granger causality test (GC) are applied. It is found that, with both methodologies, EMV-ID causes both series, which highlights the importance of having this new indicator for the analysis of the different agents involved in financial markets, among them, regulators, companies and traders in particular. Our results are consistent with the evidence of other research findings about the predictive power of the EMV-ID index on oil price volatility and some European equity markets, and the positive link between EMV-ID and the time-varying of return connectedness across gold, crude oil, world equities, currencies and bonds.

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