Contagion Effects Among Stock Markets, Treasury Bill, Petroleum, Gold, and Cryptocurrency During the COVID-19 Pandemic: A Dynamic Conditional Correlation Approach

Abstract

COVID-19 leads us to examine the contagion effects among various financial market volatilities during January 2018–July 2020 embracing the pre- and the during the COVID-19 pandemic. Selected developed and emerging stock markets, bond, oil, gold, and cryptocurrency markets are considered and the dynamic conditional correlations based multivariate GARCH-type models are employed to measure the dynamic correlations among the financial market volatilities. The dynamic correlation enables us to analyse the degree of contagion effects. The results show that most of our return series experience a high volatility persistence with the value higher than 0.80, except for the stock market of US (DJI) and the gold market. When we compare the degree of contagion effects before and during COVID-19, the conditional correlation significantly increases after the COVID-19 announcement in many pairs of financial markets, indicating the contagion effects among these markets during the recent COVID-19 months. However, it is observed that the dynamic correlations between gold-DJI, gold-Stock Exchange of Thailand (SET), and US treasury bill (TNX) are negative during the COVID-19 pandemic, indicating that gold can act as the safe-haven asset for these three markets.