| Summary: | In this study, we carry out a comparative analysis between the US and South Korea, with a special attention to three key areas, including the stock market, the currency market, and the bond market. By employing a composite model, VAR-GARCH-BEKK, we will attempt to capture both mean and volatility spillovers between the pandemic and financial markets, so as to explore the extent and ways in which the COVID-19 pandemic influences the financial sector. The empirical results provide substantial evidence in the following areas: (i) South Korea seems more vulnerable since all of its financial markets are seen to be statistically associated with the growth in infections. (ii) For the US, only the stock market is negatively impacted by the confirmed cases in terms of a conditional mean spillover model. (iii) According to the impulse response functions (IRFs), apart from the US dollar index, both the TED spread and stock returns respond significantly to innovations from the pandemic. (iv) There is little evidence to support the presence of volatility transmission from the pandemic to the financial markets in the two countries.
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