Evaluating Market Downturn Connectedness Between S&P 500 Index Funds, Gold, and Oil Markets

Abstract

This study evaluates the market downturn connectedness between S&P 500 index funds and real-time markets (gold and WTI) during the COVID-19 pandemic and the Russia-Ukraine wars. Using the TVP-VAR approach, we explored the significant connectedness among these markets during both crisis episodes. The S&P 500 Index Fund (State Street S&P 500 Index Fund Class N) is the net risk spillover receiver in the system, whereas S&P 500 Index funds (all others) are significant volatility spillover transmitters during the COVID-19 and Russia-Ukraine wars. Furthermore, gold and WTI receive net risk spillovers in both crises. However, all S&P 500 index funds are also pairwise and extensively connected with real-time markets (gold and WTI) in the COVID-19 and Russia-Ukraine wars. This study offers potential investment insights for shareholders, traders, speculators, and portfolio managers in these markets.