S&P 500 Index Price Spillovers around the COVID-19 Market Meltdown

This paper explores price spillover effects around the COVID-19 pandemic market meltdown between the S&P 500 index, five other financial markets, and the VIX. Frequency domain causalities are estimated for the January-May 2020 time period on a high-frequency data set at five-minute intervals. The results reveal that price movements in the S&P 500 generally caused price movements in other financial markets before the market meltdown; however, a large number of bi-directional causalities emerged during the market meltdown. During the market recovery, S&P 500 price movements were more likely to be caused by other financial markets' price movements. The VIX, exchange rate, and gold returns had the most prominent influence on the S&P 500 returns in the market recovery.

Automated summary

The study found that before the COVID-19 market meltdown, price movements in the S&P 500 generally affected other financial markets, but during the market crash, many bi-directional causations emerged. During the market recovery, movements in the S&P 500 prices were more likely influenced by movements in other financial markets.