The impact of the China stock market on global financial markets during COVID-19

This study aims to investigate the reasons behind the world stock markets fastest fall on 13th March 2020 (Black Friday) by using the global data. We argue that the event of Black Friday takes place due to investors' fear of the COVID-19 pandemic and China stock market. We gather the daily time series data of the stock market indices covering the one-year period from 14th March 2019 to 13th March 2020. A graphical representation is used to show the trend of global indices. Also, the pool OLS regression model is applied to estimate the impact of COVID-19 and China stock market on the world financial markets. The empirical results show that the lagged value of China stock market and COVID-19 are significantly affecting the foreign indices. The findings depict a unidirectional relationship between China and global stock markets, meaning that the volatility of global stock markets at the time (t) is explained by China stock market closing value of yesterday (t - 1). The single most important contribution of this study is to reveal the fact about the steepest one-day fall of stock markets on 13th March 2020, which takes place since October 1987 (Black Monday1).