Jumps in Equity Return Volatilities of Chinese Stock Markets in Pre and Post Covid-19

Abstract

In this study we examine economic and financial conditions drive volatility jumps in pre and post crisis (Covid-19) in a similar way. Using monthly returns of Chinese equity stocks, monthly realized volatility jumps in returns are identified for SZSE index over the period 2010M07 to 2023M08. The whole sample divides into two sections as pre and post Covid-19. Jumps in volatility detect both continuous and discontinuous through median variance approach of Andersen (2012). We employ stepwise regression analysis to determine the key drivers of volatility-jumps in returns. Results uncovers economic factors (gross domestic product, industrial production, oil prices and exchange rate) negatively while financial conditions (stock prices, policy uncertainty and sentiment index) directly cause jumps in volatility. From pre to post crisis, shift in economic-financial conditions is observed. The results provide significance to policy makers and investors to hedge against turbulent periods.