If worst comes to worst: Co-movement of global stock markets in the US-China trade war

• Toan Luu Duc Huynh ^{[1] [2]} ; Tobias Burggraf ^[1]
  1. [1] WHU-Otto Beisheim School of Management

     WHU-Otto Beisheim School of Management

     Landkreis Mayen-Koblenz, Alemania

     
  2. [2] University of Economics Ho Chi Minh City

     University of Economics Ho Chi Minh City

     Vietnam

     
• Localización: Economics and Business Letters, ISSN-e 2254-4380, Vol. 9, Nº. 1, 2020, págs. 21-30
• Idioma: inglés
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• Resumen

  • This paper investigates the co-movement characteristics of global stock markets in the context of the US-China trade war. By applying a set of different trivariate Copulas, our results suggest that markets co-move symmetrically in the pre-trade war period, but exhibit negative downside movements and heavy tails during the trade war. Furthermore, we find evidence for left-tail dependency structures during that period. Most importantly, this study finds that the trade war poses a systematic risk on global markets, which potentially can trigger simultaneous market downside trends. Our results are robust across different European equity market indices.