Return Connectedness across Asset Classes around the COVID-19 Outbreak

Elie Bouria, Oguzhan Cepni, David Gabauer*, Rangan Gupta

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


In this paper, we show evidence of a dramatic change in the structure and time-varying patterns of return connectedness across various assets (gold, crude oil, world equities, currencies, and bonds) around the COVID-19 outbreak. Using the TVP-VAR connectedness approach, the results show that the dynamic total connectedness across the five assets was moderate and quite stable until early 2020. After that, the total connectedness spikes and the structure of the network of connectedness alters, which concurs with the COVID-19 outbreak. The equity and USD indices are the primary transmitters of shocks before the outbreak, whereas the bond index becomes the main transmitters of shocks during the COVID-19 outbreak. However, the USD index is a net receiver of shocks to other assets during the outbreak period. Furthermore, using a recently developed newspaper-based index of uncertainty in financial markets due to infectious diseases to capture the recent impact of COVID-19, we find that connectedness is positively related to this index, and increases at higher levels (conditional quantiles) of connectedness. Overall, our results reflect the speedy disturbing effects of the COVID-19 outbreak, which matters to the formulations of policies seeking to achieve financial stability. The results also indicate a possibility to threaten investors’ portfolios and fade the benefits of diversification.
Original languageEnglish
Article number101646
JournalInternational Review of Financial Analysis
Number of pages11
Publication statusPublished - Jan 2021

Bibliographical note

Published online: 20 November 2020.


  • COVID-19 outbreak
  • Financial markets contagion
  • Return connectedness

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