Risk spillovers from China's and the US stock markets during high-volatility periods: Evidence from East Asianstock markets

Wang, Bo; Xiao, Yang

doi:10.1016/j.irfa.2023.102538

Cited by 9 publications

(2 citation statements)

References 60 publications

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“…Research on the risk spillover effects of China's stock market has increased in recent years (Yadav et al 2023;Zhong and Liu 2021;Zhou et al 2023). Wang and Xiao (2023) found that China has significant risk spillover effects on East Asian stock markets, but this risk spillover effect is weaker during periods of high volatility. Jiang et al (2021) found that multiple developed countries such as the United States, Britain, and Japan have significant risk spillover effects on the Chinese stock market, and regulatory agencies must monitor multiple markets simultaneously.…”

Section: Literature Reviewmentioning

confidence: 99%

Bidirectional Risk Spillovers between Chinese and Asian Stock Markets: A Dynamic Copula-EVT-CoVaR Approach

Zhao,

Park

2024

JRFM

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This study aims to investigate bidirectional risk spillovers between the Chinese and other Asian stock markets. To achieve this, we construct a dynamic Copula-EVT-CoVaR model based on 11 Asian stock indexes from 1 January 2007 to 31 December 2021. The findings show that, firstly, synchronicity exists between the Chinese stock market and other Asian stock markets, creating conditions for risk contagion. Secondly, the Chinese stock market exhibits a strong risk spillover to other Asian stock markets with time-varying and heterogeneous characteristics. Additionally, the risk spillover displays an asymmetry, indicating that the intensity of risk spillover from other Asian stock markets to the Chinese is weaker than that from the Chinese to other Asian stock markets. Finally, the Chinese stock market generated significant extreme risk spillovers to other Asian stock markets during the 2007–2009 global financial crisis, the European debt crisis, the 2015–2016 Chinese stock market crash, and the China–US trade war. However, during the COVID-19 pandemic, the risk spillover intensity of the Chinese stock market was weaker, and it acted as the recipient of risk from other Asian stock markets. The originality of this study is reflected in proposing a novel dynamic copula-EVT-CoVaR model and incorporating multiple crises into an analytical framework to examine bidirectional risk spillover effects. These findings can help Asian countries (regions) adopt effective supervision to deal with cross-border risk spillovers and assist Asian stock market investors in optimizing portfolio strategies.

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Section: Literature Reviewmentioning

confidence: 99%

Bidirectional Risk Spillovers between Chinese and Asian Stock Markets: A Dynamic Copula-EVT-CoVaR Approach

Zhao,

Park

2024

JRFM

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“…The findings offer effective suggestions for China's carbon market trading. Vellachami Sanggetha et al (2023) [43] examined the volatility transmission from the European energy market to the carbon market, enhancing understanding of information and risk overflow mechanisms from the energy market to the carbon market and serving as a basis for policy-making, risk management, and portfolio optimization decisions.…”

Section: Introductionmentioning

confidence: 99%

The price behavior characteristics of China and Europe carbon emission trading market based on the perspective of time scaling and expected returns

Zhang,

Cheng

2024

PLoS ONE

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China has the world’s largest carbon market in terms of greenhouse gas emissions, but its system needs to be improved and enhanced. In comparison, the European carbon market stands as the most mature and well-developed carbon market globally. Carbon trading prices, serving as a barometer for the carbon market, are significantly influenced by investor behavior. Therefore, it is necessary to analyze the characteristics of carbon trading prices in both China and Europe, considering the impact of investor trading intervals and psychological expected returns. This study utilizes the Zipf method to characterize the dynamic behavior of carbon trading prices between China and Europe, conducting a comparative analysis. The results show distinctive asymmetry in the behavior of carbon trading prices in both markets. In the Chinese market, when τ < 277, the absolute deviation da(τ, ε) value gradually changes but consistently indicates a bullish trend. However, when τ ≥ 277, the da(τ, ε) value surges rapidly, reflecting a pronounced bullish sentiment among investors toward carbon trading prices in China. In the European market, within the sample period, regardless of variations in τ and ε, the da(τ, ε) value shows a linear upward trend, indicating a significant overall bullishness in prices. This suggests a higher probability of long-term bullishness in carbon trading prices. Investors’ investment time scale (τ) and expected returns (ε) both influence the behavior of carbon trading prices in both China and Europe. Generally, a longer τ implies a higher probability of bullishness. As for ε, higher values lead to more extreme judgments on price movements, resulting in greater distortion in carbon trading prices. Short-term investors (τ<1 month) anticipate extreme fluctuations, exhibiting random behavior when ε < 0.15 and converging rapidly to extreme values of 1 or 0 when ε ≥ 0.15. Long-term investors (τ>quarter) are less biased, expressing a bullish outlook on both Chinese and European carbon prices. With increasing ε, the probability of bullishness either increases or decreases rapidly until reaching the saturation point. Once saturated, there is no further distortion in carbon price behavior. Furthermore, the Chinese carbon market displays a positive trend in carbon trading prices and a higher probability of long-term bullishness. For the European market, lower expected returns contribute to considerable carbon trading price fluctuations, exacerbating risk and uncertainty. The results of this study contribute to understanding the diverse trading behaviors in Chinese and European carbon markets and provide guidance for avoiding extreme volatility in carbon trading prices.

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Asian stock market volatility and economic policy uncertainty: The role of world and regional leaders

Keddad

2024

Journal of International Financial Markets, Institutions and Mo

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Risk spillovers from China's and the US stock markets during high-volatility periods: Evidence from East Asianstock markets

Cited by 9 publications

References 60 publications

Bidirectional Risk Spillovers between Chinese and Asian Stock Markets: A Dynamic Copula-EVT-CoVaR Approach

Bidirectional Risk Spillovers between Chinese and Asian Stock Markets: A Dynamic Copula-EVT-CoVaR Approach

The price behavior characteristics of China and Europe carbon emission trading market based on the perspective of time scaling and expected returns

Asian stock market volatility and economic policy uncertainty: The role of world and regional leaders

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