LAUSR

This paper investigates the cross-market spillover effect between the Chinese and U.S. stock index returns, and the markets’ volatility from the impact of COVID-19′s spread in China. The results reveal that there was an asymmetric transmission of return shocks to a stronger degree from the Chinese stock market to the U.S. market rather than from the opposite direction, and this asymmetric spillover effect during the COVID-19 spread period in China was three to five times stronger than during the pre-COVID-19 period and the period when COVID-19 was contained in China. Furthermore, we find the risk correlation between the two markets are highest during the COVID-19 spread period in China, and RMB/US exchange rate and gold are two macro spillover channels. The study has important implications for regulators’ supervision of financial markets during a global crisis, and for investors’ cross-market hedging of spillover risks from a systematic shock. © 2022 The Author(s)