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Economic Policy Uncertainty and Volatility Spillovers Among International Stock Market Indices During the COVID-19 Outbreak

Author

Listed:
  • Fei Su

    (Nanjing University of Aeronautics and Astronautics)

  • Feifan Wang

    (Shanghai University of Finance and Economics)

  • Yahua Xu

    (Central University of Finance and Economics)

Abstract

Using a sample of 16 international stock market indices spanning the period of January 2015 to June 2022, we examine how global equity markets interact with respect to volatility spillover, with a special focus on types of investment horizons, and how the connectedness structure evolves during the COVID-19 outbreak. Empirical results suggest that there is strong evidence of volatility spillovers among global stock markets, and the COVID-19 pandemic further strengthens such volatility spillovers. However, the structure of the frequency connectedness changes gradually when compared to the full sample period. We further investigate if economic policy uncertainty (EPU) affects volatility spillovers among global stock markets. The results suggest that EPU significantly affects the connectedness among global stock markets, particularly during the COVID-19 pandemic period. Overall, the findings suggest that volatility spillovers across international stock markets vary with time horizons and market conditions, which contributes to the academic literature on modelling global volatility spillovers. Practically, the findings of the study contribute to investors and policymakers in adjusting trading strategies and monitoring market risks.

Suggested Citation

  • Fei Su & Feifan Wang & Yahua Xu, 2025. "Economic Policy Uncertainty and Volatility Spillovers Among International Stock Market Indices During the COVID-19 Outbreak," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(1), pages 237-266, March.
    • Handle: RePEc:kap:apfinm:v:32:y:2025:i:1:d:10.1007_s10690-024-09452-z
    DOI: 10.1007/s10690-024-09452-z
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    More about this item

    Keywords

    Global stock market; Volatility spillovers; Economic policy uncertainty; COVID-19 pandemic;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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