Stock markets and the COVID-19 fractal contagion effects

David Iheke Okorie; Boqiang Lin

doi:10.1016/j.frl.2020.101640

Stock markets and the COVID-19 fractal contagion effects

Financ Res Lett. 2021 Jan:38:101640. doi: 10.1016/j.frl.2020.101640. Epub 2020 Jun 6.

Authors

David Iheke Okorie¹, Boqiang Lin²

Affiliations

¹ Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, 422 South Siming Road, Xiamen, 361005, China.
² School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Fujian, 361005, China.

Abstract

This article investigates the fractal contagion effect of the COVID-19 pandemic on the stock markets. The stock market information of the top 32 coronavirus affected economies (as of 31st March 2020) was sampled for ex-ante and ex-post COVID-19 outbreak analysis using the Detrended Moving Cross-Correlation Analysis (DMCA) and Detrended Cross-Correlation Analysis (DCCA) techniques. The results confirm a fractal contagion effect of the COVID-19 pandemic on the stock markets. Furthermore, this fractal contagion effect fizzles out over time (in the middle and long run) for both the stock markets return and volatility. Therefore, this article provides pieces of evidence for the COVID-19 fractal contagion effect on the stock markets.

Keywords: Contagion; Cross-correlation; Return; Stock markets; Volatility.