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Shift contagion and minimum causal intensity portfolio during the COVID-19 and the ongoing Russia-Ukraine conflict

Author

Listed:
  • Amine Ben Amar

    (UM6P - Université Mohammed VI Polytechnique [Ben Guerir])

  • Mondher Bouattour

    (Excelia Group | La Rochelle Business School, LGTO - Laboratoire de Gestion et des Transitions Organisationnelles - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse)

  • Makram Bellalah

    (LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne)

  • Stéphane Goutte

    (PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université, SOURCE - SOUtenabilité et RésilienCE - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines - IRD [Ile-de-France] - Institut de Recherche pour le Développement)

Abstract
Using the TYDL causality test, this paper attempts (i) to investigate the existence of shift contagion among a large spectrum of financial markets during recent stress and stress-free periods and (ii) to propose a new approach of portfolio management based on the minimization of the causal intensity. During the COVID-19 crisis period, the shift contagion analysis not only reveal a tripling of the causal links between the markets studied, but also a change in the causal structure. Beyond the initial impact of the COVID-19 crisis on financial markets, policy interventions seem to have helped in reassuring market participants that the further spread of financial stress would be mitigated. However, the Russian-Ukrainian conflict, and the high degree of uncertainty it entailed, has again exacerbated the interdependencies between financial markets. In terms of portfolio analysis, our minimum-causalintensity approach records a lower (respectively higher) reward-to-volatility ratio than the Markowitz (1952 & 1959) minimum-variance traditional approach during the pre-COVID-19 (respectively prewar) period. On the other hand, both approaches, the one we propose in this paper and the minimum-variance approach, record negative reward-to-volatility ratios during crisis periods.

Suggested Citation

  • Amine Ben Amar & Mondher Bouattour & Makram Bellalah & Stéphane Goutte, 2023. "Shift contagion and minimum causal intensity portfolio during the COVID-19 and the ongoing Russia-Ukraine conflict," Post-Print hal-04122251, HAL.
    • Handle: RePEc:hal:journl:hal-04122251
    DOI: 10.1016/j.frl.2023.103853
    Note: View the original document on HAL open archive server: https://ut3-toulouseinp.hal.science/hal-04122251v1
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    Cited by:

    1. Amal Abricha & Amine Ben Amar & Makram Bellalah, 2024. "Commodity futures markets under stress and stress-free periods: Further insights from a quantile connectedness approach," Post-Print hal-04515196, HAL.
    2. Chancharat, Surachai & Sinlapates, Parichat, 2023. "Dependences and dynamic spillovers across the crude oil and stock markets throughout the COVID-19 pandemic and Russia-Ukraine conflict: Evidence from the ASEAN+6," Finance Research Letters, Elsevier, vol. 57(C).
    3. Marina Yu. Malkina & Dmitry Yu. Rogachev, 2024. "Financial Contagion of the Russian Stock Market from the European Stock Market During the COVID-19 Pandemic," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 27-42, April.
    4. Mariem Talbi & Monia Mokhtar Ferchichi & Fatma Ismaalia & Samia Samil, 2024. "Unveiling COVID-19’s impact on Financial Stability: A Comprehensive Study of Price Dynamics and Investor Behavior in G7 Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 14(1), pages 216-232, January.
    5. Abricha, Amal & Ben Amar, Amine & Bellalah, Makram, 2024. "Commodity futures markets under stress and stress-free periods: Further insights from a quantile connectedness approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 229-246.

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    More about this item

    Keywords

    socially responsible investment; Shift contagion; diversification; minimum-causal intensity portfolio; clean energy; financial market; cryptocurrencies;
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