Volatility Spillover Stock Price Index during the COVID-19 Pandemic: A Study from ASEAN on the United States and China

Abstract

The COVID-19 pandemic had a major impact on the world economy by restricting economic activity, including stock prices. This article examines effects of volatility spillover in the midst of the COVID-19 also at the early recovery period from the crisis using stock price index data from China, US, and ASEAN: Indonesia, Malaysia, Singapore, Philippines, and Thailand. The research was conducted using the BEKK-GARCH model to see the effect ofvolatility between countries. In the correlation test, we found that in the post-crisis period caused by COVID-19, the correlation between the US and ASEAN increased, while against China and ASEAN it decreased, and relations between ASEAN countries also decreased after the crisis period. From the VAR modeling, it was found that the S&P500 during the post-crisis period experienced a decrease in the value of transmission to ASEAN. In contrast to the SSE, which actually experienced an increase in the value of transmission to ASEAN in the post-crisis. In the results of the BEKK-GARCH modeling, it was found that the shocks that occurred in the S&P500 stock market during the pre-crisis period did not affect the volatility of JKSE & SETI returns in the post-crisis period. In contrast to the S&P500 and KLSE, STI, PSEI, where the shocks that occurred during the pre-crisis period, positively affected the post-crisis period. Between SSE and KLSE & PSEI, during the post-crisis period there was an increase, meaning that the shocks that occurred in the SSE stock market during the pre-crisis period positively affected KLSE & PSEI's return volatility in the post-crisis period. In contrast between SSE and JKSE, STI, SETI, the shocks that occurred during the pre-crisis period did not affect the shares of the 3 ASEAN countries during the post-crisis period. Keywords: BEKK; MGARCH; COVID-19; volatility; spillover; index