2020/07/15 by Fu Qiao, Yan Yan, Qiao, Fu +1
Economics, Econometrics and Finance · Mathematics · #COVID-19 Pandemic Impacts #Market Dynamics and Volatility #COVID-19 epidemiological studies
paper · pdf · doi:10.48550/arxiv.2007.07487
Using the carefully selected industry classification standard, we divide 102\nindustry securities indices in China's stock market into four demand-oriented\nsector groups and identify demand-oriented industry-specific volatility\nspillover networks. The "deman-oriented" is a new idea of reconstructing the\nstructure of the networks considering the relationship between industry sectors\nand the economic demand their outputs meeting. Networks with the new structure\nhelp us improve the understanding of the economic demand change, especially\nwhen the macroeconomic is dramatically influenced by exogenous shocks like the\noutbreak of COVID-19. At the beginning of the outbreak of COVID-19, in China's\nstock market, spillover effects from industry indices of sectors meeting the\ninvestment demand to those meeting the consumption demands rose significantly.\nHowever, these spillover effects fell after the outbreak containment in China\nappeared to be effective. Besides, some services sectors including utility,\ntransportation and information services have played increasingly important\nroles in the networks of industry-specific volatility spillovers as of the\nCOVID-19 out broke. By implication, firstly, being led by Chinese government,\nthe COVID-19 is successfully contained and the work resumption is organized\nwith a high efficiency in China. The risk of the investment demand therefore\nwas controlled and eliminated relatively fast. Secondly, the intensive using of\nnon-pharmaceutical interventions (NPIs) led to supply restriction in services\nin China. It will still be a potential threat for the Chinese economic recovery\nin the next stage.\n