Macroeconomics

Spillover effect

Context (archaeology)

Volatility (finance)

Stock (firearms)

Shock (circulatory)

Stock market

China

Archaeology

Economics

Business

Coronavirus disease 2019 (COVID-19)

Exchange rate

Emerging markets

Geography

Monetary economics

Stock exchange

Infectious disease (medical specialty)

Internal medicine

Financial economics

Medicine

International economics

Finance

Stock market index

Disease

Renminbi

Pathology

Finance research letters

This paper investigates the cross-market spillover effect between the Chinese and U.S. stock index returns, and the markets' volatility from the impact of COVID-19′s spread in China. The results reveal that there was an asymmetric transmission of return shocks to a stronger degree from the Chinese stock market to the U.S. market rather than from the opposite direction, and this asymmetric spillover effect during the COVID-19 spread period in China was three to five times stronger than during the pre-COVID-19 period and the period when COVID-19 was contained in China. Furthermore, we find the risk correlation between the two markets are highest during the COVID-19 spread period in China, and RMB/US exchange rate and gold are two macro spillover channels. The study has important implications for regulators' supervision of financial markets during a global crisis, and for investors' cross-market hedging of spillover risks from a systematic shock.

COVID-19′s impact on the spillover effect across the Chinese and U.S. stock markets