Rethinking Financial Contagion: Information Transmission Mechanism During the COVID-19 Pandemic.

46 Pages Posted: 17 May 2020 Last revised: 1 Jun 2020

See all articles by Larisa Yarovaya

Larisa Yarovaya

University of Southampton - Southampton Business School

Janusz Brzeszczynski

Newcastle Business School (NBS), Northumbria University, Newcastle upon Tyne, United Kingdom

John W. Goodell

University of Akron - Department of Finance, College of Business Administration

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Chi Keung Lau

University of Huddersfield

Date Written: May 16, 2020

Abstract

Rapidly growing numbers of empirical papers assessing the financial effects of COVID-19 pandemic triggered an urgent need for a study summarising the existing knowledge of contagion phenomenon. This paper provides a review of conceptual approaches to studying financial contagion at four levels of information transmission: (i) Catalyst of contagion; (ii) Media Attention; (iii) Spillover effect at financial markets; (iv) Macroeconomic fundamentals. We discuss the unique characteristics of COVID-19 crisis and demonstrate how this shock differs from previous crises and to what extent the COVID-19 pandemic can be considered a ‘black swan’ event. We also review the main concepts, definitions and methodologies that are frequently, but inconsistently, used in contagion literature to unveil the existing problems and ambiguities in this popular area of research. This paper will help researchers to conduct coherent and methodologically rigorous research on the impact of COVID-19 on financial markets during the pandemic and its aftermath.

Keywords: Contagion, COVID-19, Return and Volatility Transmission, Spillovers Effect, Coronavirus, Black Swan

JEL Classification: G10, G14

Suggested Citation

Yarovaya, Larisa and Brzeszczynski, Janusz and Goodell, John W. and Lucey, Brian M. and Lau, Chi Keung, Rethinking Financial Contagion: Information Transmission Mechanism During the COVID-19 Pandemic. (May 16, 2020). Available at SSRN: https://ssrn.com/abstract=3602973 or http://dx.doi.org/10.2139/ssrn.3602973

Larisa Yarovaya

University of Southampton - Southampton Business School ( email )

Highfield
University Road
Southampton, SO17 1BJ
United Kingdom

Janusz Brzeszczynski

Newcastle Business School (NBS), Northumbria University, Newcastle upon Tyne, United Kingdom ( email )

Department of Accounting and Financial Management
City Campus East
Newcastle upon Tyne, NE1 8ST
United Kingdom

John W. Goodell

University of Akron - Department of Finance, College of Business Administration ( email )

259 S. Broadway
Akron, OH 44325
United States

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Chi Keung Lau

University of Huddersfield ( email )

Queensgate
Huddersfield HD1 3DH, West Yorkshire HD1 3DH
United Kingdom

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