Understanding the effects of COVID-19 on Financial Market Structures: A study of the USA & Brazil

Ola Megahed Ali (Advisor: Pere Colet)
Master Thesis (2022)

This Master thesis investigates the effects of the Covid-19 pandemic on the topological properties of both American and Brazilian stock markets. We build a minimal spanning tree before and during the pandemic using the correlation matrix of stocks available at the S&P500 and IBOV stock indices. We use network measures to assess the most central sectors and quantify the changes they undergo during the pandemic. Our results show that normalized tree length decreases as the correlation coefficient increases during crises; however, the mean occupational layer increases during a pandemic contrary to regular financial crises. We find the Financial, Industrial, and Information Technology sectors maintain dominance over the American market during and after the pandemic, while in Brazil, the Consumer Discretionary sector shows dominance before and after the pandemic, while the Energy and Industrial sectors become more central during the pandemic.

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