An Empirical Study on the Linkage between S&P 500 Index and CSI 300 Index under COVID-19

Abstract

Studying the linkage between US and Chinese stock markets under the context of COVID-19 outbreak in 2020 can help us to prevent related financial risks, regulate corresponding monetary policies, and avoid the herd effect of investors being blindly optimistic or pessimistic. Between January 1, 2020 and November 10, 2022, using the returns of the S&P 500 index as a proxy for the US stock market and the CSI 300 index as a proxy for the Chinese stock market, the VAR-GARCH-BEKK model was used to empirically analyze the relationship between the two. According to the findings, the rise and fall of the S&P 500 index has some favorable effects on the rise and fall of the CSI 300 index. Yet, the CSI 300 index's movement is largely determined by past data, suggesting that the S&P 500's volatility, which represents the US stock market, has little effect on the Chinese stock market, which is represented by the CSI 300.