Dynamics of return and volatility spill-over between developed, emerging and African equity markets during the Covid-19 pandemic and Russia–Ukraine war

Abstract We contribute to the growing literature examining spill-over effects between international equity markets in the “new normal” disposition and extend upon previous studies to include more recent periods covering the Russia–Ukraine war. Using the Diebold and Yilmaz network method, we estimate the returns and volatility connectedness between developed, emerging and African markets over the period 11 March 2020 to 30 June 2022. Our findings can be summarised in three points. Firstly, the static connectedness analysis informs us that emerging and African (developed) markets are the main net receivers (transmitters) of systemic shocks over the sample period. Secondly, the time-varying connectedness analysis further informs us that network connectedness is higher during the Russia–Ukraine war compared to the announcement of Covid-19 variants. Thirdly, the time-varying market specific analysis distinguishes which individual equities are most or least vulnerable to systemic shocks during the Covid-19 pandemic and Russia–Ukraine war. These findings are relevant for investors in their search for better hedging opportunities in equity markets. Moreover, market regulators should take heed of our findings as the observed build-up of systemic risk following the Russia–Ukraine conflict is an indicative of contagion effects experienced.