The Degree of Stock Market Interdependence between the U.S. and China during the COVID-19 Pandemic Period

The COVID-19 pandemic that swept the globe in 2020 had detrimental effects on people's lives and health, as well as a substantial influence on the global economy. Due to the rapid expansion of international financial integration, a country's stock market is no longer independent, and there is a rising interdependence between global stock markets. The U.S. and China's stock markets, two pillars of the world economy, suffered losses to different degrees during COVID-19. In this paper, the U.S. stock market, China's Shanghai stock market, and China's Hong Kong stock market performed as research subjects, and representative index data of the NASDAQ Composite Index (IXIC) and Dow Jones Industrial Average Index(DJIA) in the United States, the Shanghai Securities Composite Index (SSEC), and the Hong Kong Hang Seng Index (HSI) in China, from January 2, 2020, to December 31, 2021, were selected. This paper investigates the interdependence between the U.S. and China's stock markets during the specific time of COVID-19 by using a VECH-GARCH model for empirical analysis. We've concluded that the volatility of both the U.S. and China's stock markets is influenced by their respective histories, with the U.S. being more impacted than China. During the COVID-19 period, the volatility of the U.S. stock market was interdependent with that of China's mainland stock market and China's Hong Kong stock market, although not at a very high level. Additionally, China's Hong Kong stock market was more affected by the volatility of the U.S. stock market than China's Shanghai stock market is.