Financial Contagion among Emerging Asian Stock Markets : From the 2007–2008 Financial Crisis to COVID-19

With the resilient economic growth during and after the 2007–2008 financial crisis, emerging markets (particularly in Asia) were considered to be critical portfolio and foreign direct investment destinations for massive capital outflow generated by quantitative easing (QE) programmes. This study investigates comovement and contingency amongst strongly integrated Asian financial markets from the 2007–2008 financial crisis to the ongoing COVID-19 crisis. Daily closing prices of markets featured in the MSCI Emerging Markets Asia Index from 1st January 2007 to 31st December 2020 were analysed using the wavelet method (wavelet correlation and coherence). Multi-resolution decomposition was applied to capture frequencies and filter them into low and high frequencies. The results suggest that contingent aftershocks are more evident after 8–16 weeks, and the Bombay stock exchange reflected a negative correlation compared to other indices. The major contributions of this study are: 1) reporting contingency amongst Asian financial markets before and during COVID-19, 2) informing risk mitigation strategies based on international portfolio investments, and 3) further understanding the effect of internationalization on global financial markets. As well as providing guidelines for future research, the results can be used by policy makers and investors to make international investment decisions