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Network analysis of international financial markets contagion based on volatility indexes

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  • Lin, Weinan
  • Ouyang, Ruolan
  • Zhang, Xuan
  • Zhuang, Chengkai

Abstract

In this paper, five volatility indexes are used as the proxy to examine the risk contagion among major stock markets. Both static and dynamic connectedness methods are employed. First, the overall connectedness can help monitor the dynamic systemic risk. Sharpe increases in total spillover correspond to actual risk events, e.g., the outbreak of COVID-19. Second, Hong Kong bridges the domestic and international stock markets, and forms a protective barrier for the mainland market to some extend. Third, developed economies mainly act as the net risk transmitters in the network. Fourth, Europe shows greater power in risk contagion after the pandemic.

Suggested Citation

  • Lin, Weinan & Ouyang, Ruolan & Zhang, Xuan & Zhuang, Chengkai, 2023. "Network analysis of international financial markets contagion based on volatility indexes," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004117
    DOI: 10.1016/j.frl.2023.104039
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    References listed on IDEAS

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    More about this item

    Keywords

    Volatility index; Connectedness; Risk contaigion;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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