The Impact of COVID-19 on the Dynamic Topology and Network Flow of World Stock Markets

Bilal Ahmed Memon,Hongxing Yao

doi:10.3390/joitmc7040241

Abstract

Studies examining the impact of COVID-19 using network dynamics are scant and tend to evaluate a specific local stock market. We present a thorough investigation of 58 world stock market networks using a complex network approach spanning across the uncertain times that have resulted from the coronavirus outbreak. First, we use the daily closing prices of the world stock market indices to construct dynamic complex networks and sixteen minimum spanning tree (MST) maps for the period from December 2019 to March 2021. Second, we present the topological evolution properties of time-varying MSTs by applying normalized tree length, diameter, average path length, and centrality measures. Moreover, the empirical results suggest that (1) the highest correlation among the world stock markets is observed during the first wave of the COVID-19 pandemic in the months of February–March 2020; (2) most of the MSTs appear lower in hierarchy, and many chain-like structures are formed due to the sheer impact of pandemic-related crises; (3) Germany remained a hub node in many of the MSTs; and (4) the tree severely contracted during the first wave of the COVID-19 outbreak (during the months of February and March 2020) and expanded slightly afterwards. Moreover, the results obtained from this study can be used for the development of financial stability policies and stock market regulations worldwide.

Highlights

It all started on 31 December 2019, when Wuhan, a major city in China, reported a bulk of cases of an illness presenting with pneumonia-like symptoms
We present the findings of the minimum spanning tree analysis to measure the structural changes of N = 58 world stock indices, and analyze the topology evolution
A higher integration, as proved by previous studies [57]. All of these findings all of these findings show extreme uncertainty, higher correlation, and a volatile turbulent show extreme uncertainty, higher correlation, and a volatile turbulent period for the world period for the world stock markets, which is not unusual given the negative external stock markets, which is not unusual given the negative external shocks exerted by the black shocks exerted by the black swan event of COVID-19 [12,58,59]

Summary

Introduction

It all started on 31 December 2019, when Wuhan, a major city in China, reported a bulk of cases of an illness presenting with pneumonia-like symptoms. After these reports began, COVID-19 had affected the whole of China and had spread all around the world. Numerous countries have pledged individual country-specific and global rescue packages to minimize the economic implications of the COVID-19 crisis [2]. The uncertain times that have been caused by the COVID-19 crisis and its negative effects on the stability of the world’s financial markets [3] remain largely unstudied

Objectives

Methods

Conclusion