Time Varying Spillovers of COVID-19 on the Financial Markets


  • Erdinç Akyıldırım Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Management, İstanbul, Turkey



Anahtar Kelimeler:

Volatility Spillovers- COVID-19- Contagion


Purpose – The COVID-19 pandemic has generated exceptional response of the financial markets and exceptional increase in the volatility of asset classes. The aim of this study is to establish influence of daily ambiguity surrounding infectious disease. In particular, the purpose is to test as to how the impacts of the COVID-19 pandemic have generated volatility spillovers both onto and within traditional financial market assets. Design/methodology/approach – In this study, the methodological approach is developed upon a time-varying robust Granger-causality methodology, which is further designed to incorporate macroeconomic variables using sentiment indices and policy uncertainty indices as additional control variables. Findings – The analysis reveals that EMVID index has a vital role in driving both price and volatility of the asset classes being investigated. It also has a considerably varying effect on these financial assets. It is also shown that there are major differences of international response across the markets for equities, oil, gold and cryptocurrency. Furthermore, the transmission of volatility spillovers in the early Asian occurrence of the COVID-19 epidemic show that the financial markets that did not adequately identify the threat in the earlier phase of the pandemic. Discussion – The results help both investors and policymakers in their decision-making process as it is shown that although oil and bond markets presented some early signs for the volatility transmission, it was mainly currency and in particular cryptocurrency markets with more immediate and influential effects. Furthermore, the results provide support for the increasing maturity of the cryptocurrency ecosystem. On the other hand, they also present some important outcomes for regulatory authorities and policymakers. For instance, while the currency markets demand for cash as a catalyst of volatility and oil prices and demand adapt due to worldwide economic recession, cryptocurrency market would not be expected to respond in the same way. This result has the implication that cryptocurrencies were employed as a safe-haven vehicle during the onset of this incredible event.




Nasıl Atıf Yapılır

Akyıldırım, E. (2022). Time Varying Spillovers of COVID-19 on the Financial Markets. İşletme Araştırmaları Dergisi, 14(3), 1687–1700. https://doi.org/10.20491/isarder.2022.1464