Return and Volatility Transmission between the US and East European Equity Markets: A Comparative Analysis of the Covid-19 Pandemic and the Global Financial Crisis (GFC)

Abstract Book of the 14th International Conference on Opportunities and Challenges in Management, Economics and Accounting

Year: 2026

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Return and Volatility Transmission between the US and East European Equity Markets: A Comparative Analysis of the Covid-19 Pandemic and the Global Financial Crisis (GFC)

Jae-Kwang Hwang

ABSTRACT:

The interdependencies among financial markets have long attracted significant attention from academics and practitioners, particularly during periods of financial turmoil. Changes in dependence structures during crises are of critical concern to investors and policymakers, as correlations among equity markets tend to intensify due to spillover effects. The COVID-19 pandemic triggered unprecedented disruptions to the global economy as governments worldwide implemented stringent public health measures. Consequently, heightened asset price volatility was rapidly transmitted across markets through contagion mechanisms.

This paper examines and compares the effects of the Global Financial Crisis (GFC) and the COVID-19 pandemic on spillover dynamics between the U.S. stock market (S&P 500) and East European equity markets. Using weekly stock market returns from July 2005 to December 2022, we employ the Diebold and Yilmaz (2012) spillover index methodology to analyze both return and volatility spillover transmissions over time. The empirical results indicate that the COVID-19 pandemic generated more severe contagion effects and stronger risk transmission than the GFC.

Overall, the findings provide comprehensive evidence of heightened financial interconnectedness during major crises and reveal strong co-movements between East European equity markets and the U.S. stock market, particularly during periods of extreme uncertainty. This study offers important insights for investors, policymakers, and market participants, emphasizing the evolving nature of financial spillovers and the critical need for robust risk management strategies during episodes of global financial instability.

Keywords: Return and Volatility Spillover Effects, DCC GARCH, GFC, COVID-19