Author:
Puarattanaarunkorn Ornanong,Autchariyapanitkul Kittawit,Kiatmanaroch Teera
Abstract
PurposeUnlimited quantitative easing (QE) is one of the monetary policies used to stimulate the economy during the coronavirus disease 2019 (COVID-19) pandemic. This policy has affected the financial markets worldwide. This empirical research aims at studying the dependence among stock markets before and after unlimited QE announcements.Design/methodology/approachThe copula-based GARCH (1,1) and minimum spanning tree models are used in this study to analyze 14 series of stock market data, on 6 ASEAN and 8 other countries outside the region. The data are divided into two periods to compare the differences in dependence.FindingsThe findings show changes in dependence among the volatility of daily returns in 14 stock markets during each period. After the unlimited QE announcement, the upper tail dependence became more apparent, while the role of the lower tail dependence was reduced. The minimum spanning tree can show the close relationships between stock markets, indicating changes in the connection network after the announcement.Originality/valueThis study allows the dependency to be compared between stock market volatility before and after the announcement of unlimited QE during the COVID-19 pandemic. Moreover, the study fills the literature gap by combining the copula-based GARCH and the minimum spanning tree models to analyze and reveal the systemic network of the relationships.
Reference46 articles.
1. Information theory and an extension of the maximum likelihood principle,1973
2. Conditional dependence structure between oil prices and exchange rates: a copula-GARCH approach;Journal of International Money and Finance,2013
3. ASEAN Secretariat (2020), “ASEAN policy brief: economic impact of COVID-19 outbreak on ASEAN”, available at: https://asean.org/book/1st-asean-policy-brief-economic-impact-of-covid-19-outbreak-on-asean/ (accessed 10 December 2020).
4. Network analysis of global stock markets at the beginning of the coronavirus disease (Covid-19) outbreak;Borsa Istanbul Review,2020