Did the Covid-19 Pandemic Cause Financial Contagion?

Abstract

The purpose of this paper is to investigate whether or not the COVID-19 pandemic that occurred in Wuhan city of China and spread rapidly all over the world causes the effect of contagion in financial markets. For this purpose, it has examined whether the COVID-19 pandemic had a contagion effect in the financial markets and the direction of the impact. Sixteen countries have been selected for the determination of the financial contagion effect and the correlation between cases  number of these countries and the stock market indices has been examined.  A statistically significant and negative relationship between COVID-19 case number and stock market index variables at the % 1 significance level has been found in all countries subject to the analysis. Considering that outbreaks such as SARS, Swine Flu, MERS and COVID-19 spread outside the regions they occur, have a negative impact on financial markets and the world is open to such the epidemics; has made it compulsory for countries to take the necessary measures to reduce their vulnerability to the financial markets.