Developed and Emerging Stock Markets Volatility During the Global Pandemic of Coronavirus Disease 2019 (COVID-19): Dynamic Correlation Approach

Abstract

This paper examines the dynamic volatility relationship following the COVID-19 impacts in three developed stock markets (DM) and three emerging stock markets (EM) using the DCC-GARCH-type models with various distributions. The finding indicates that the DCC-GARCH-X model with student-t distribution outperforms those with Gaussian and Skew student-t distributions for our dataset. Volatilities were found to be high during the COVID-19 pandemic and they were higher in the emerging markets than in the developed markets. The result on the volatility of each country confirms the high persistence of volatility in all stock market returns except for Italy. Our empirical results highlight the weak positive impact of COVID-19 pandemic on some developed and emerging stock volatilities.