The dynamic causality between Chinese and ASEAN stock markets

Abstract

COVID-19 has caused severe shocks to the Chinese and ASEAN stock markets. This paper investigates the relationship between the Chinese and ASEAN stock markets using the bootstrap rolling-window causality test. The results show that there is a bidirectional Granger causality relationship between the Chinese and ASEAN stock markets with time-varying characteristics. Before the COVID-19 outbreak, the interaction between the Chinese and ASEAN stock markets was mainly positive. After the COVID-19 outbreak, during the off-peak period, the interaction between the Chinese and ASEAN stock markets was positive or negative at different periods; during the peak period of the epidemic, the ASEAN stock markets had negative impacts on the Chinese stock market. In addition, the relationship between the Chinese and ASEAN stock markets was enhanced during COVID-19. According to the interaction mechanism, economic and political factors would affect the relationship between the Chinese and ASEAN stock markets, but major events such as COVID-19 have a greater impact. Therefore, macroeconomic policy should play a positive role in the stock market.