Template-Type: ReDIF-Article 1.0
Author-Name: Marina Yu. Malkina
Author-Email: mmuri@yandex.ru
Author-Workplace-Name: Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation
Author-Name: Dmitry Yu. Rogachev
Author-Email: rogistyle@mail.ru
Author-Workplace-Name: Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation
Title: Financial Contagion of the Russian Stock Market from the European Stock Market During the COVID-19 Pandemic
Abstract: This paper investigates the transmission of financial contagion from the European to the Russian stock market during the COVID-19 pandemic. Financial contagion refers to the spread of instability and
shocks across individual countries, sectors, or markets during a crisis, where the relationship between returns and volatility of different assets goes beyond normal interactions. Using the construction of extended autoregressive models, we test the contagion of the RTSI composite index from the EURO STOXX 50 index, with the US dollar exchange rate and the spot price of Urals crude oil serving as control variables. The calculation of the moving coefficient of variation in assets prices allows us to distinguish the pre-crisis, crisis and post-crisis periods, for which three separate autoregressive models are built. The contagion of the Russian stock market from the European stock market in these models is identified in two ways: 1) based on the growth and significance of estimated coefficient for the tested variable (STOXX 50 index return) during the crisis; 2) through an increase in the contribution of the tested variable to the explained variance of the dependent variable (RTSI return). In addition, we tested contagion based on the method of central co-moments of the distribution of returns, skewness and volatility of the tested and dependent variable. The analysis has convincingly demonstrated the existence of a financial contagion effect from the European stock market to the Russian stock market in the short term — strengthening of the impact of the European STOXX 50 index on the Russian RTSI index in the acute phase of the pandemic. Understanding the factors contributing to the spread of market shocks in the context of financial globalization can help policymakers to implement effective financial regulatory measures and maintain long-term financial stability in line with national interests. For investors, it helps to identify potential risks and opportunities, enabling optimal hedging and diversification response strategies.
Classification-JEL: G01, F37
Keywords: stock market, rate of returns, financial contagion, COVID-19 pandemic, exchange rate, crude oil price, extended autoregressive model
Journal: Finansovyj žhurnal – Financial Journal
Pages: 27-42
Issue: 2
Year: 2024
Month: April
DOI: 10.31107/2075-1990-2024-2-27-42
File-URL: https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2024/2/statii/02_2_2024_v16.pdf
File-Format: Application/pdf 
Handle: RePEc:fru:finjrn:240202:p:27-42