Volatility Spillover and Connectedness Between SME Indices During COVID-19 Pandemic and Russia – Ukraine War

The current study measures the volatility spillover and connectedness between the SME indices before and after the outbreak of COVID-19, as well and during the Russia-Ukraine tension. The GARCH and the TVP-VAR approach of Diebold Yilmaz (2014) has been applied to evaluate the volatility spillover and connectedness between the markets. In the full study period, the spillover between the indices is significant in the long term. The risk spread between the indices is increasing during the Russia-Ukraine war, compared to its level following the Covid-19 outbreak. The Covid-19 pandemic has had a short-term effect on the volatility connection within the indices. Following the pandemic outbreak, there has been a significant shift in the degree of connectivity between the indices. Moreover, during the pandemic, India and South Africa are the net positive transmitters of volatility. The study offers valuable insights for investors and regulators in managing risks and promoting stability.