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Measuring risk spillovers from multiple developed stock markets to China: A vine-copula-GARCH-MIDAS model

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  • Jiang, Cuixia
  • Li, Yuqian
  • Xu, Qifa
  • Liu, Yezheng

Abstract

In order to examine the risk spillovers among multiple stock markets efficiently, we develop a vine-copula-GARCH-MIDAS model to estimate the multivariate joint distribution, and then derive CoVaR-type risk measures. Our empirical results on international stock markets show that the vine-copula-GARCH-MIDAS model is promising and is superior to several popular models. One the one hand, it exploits macroeconomic fundamentals to improve the accuracy of CoVaR measure. On the other hand, it is able to measure risk spillovers in a “multiple-to-one” pattern and solve the problem of underestimation in conventional “one-to-one” methods. What’s more, we find that there are significant risk spillovers from multiple developed stock markets including the US, Japan, and Britain, to China, which is necessary for regulators to be concerned with multiple markets simultaneously instead of a single market.

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  • Jiang, Cuixia & Li, Yuqian & Xu, Qifa & Liu, Yezheng, 2021. "Measuring risk spillovers from multiple developed stock markets to China: A vine-copula-GARCH-MIDAS model," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 386-398.
    • Handle: RePEc:eee:reveco:v:75:y:2021:i:c:p:386-398
    DOI: 10.1016/j.iref.2021.04.024
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    Cited by:

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    2. Ghani, Maria & Guo, Qiang & Ma, Feng & Li, Tao, 2022. "Forecasting Pakistan stock market volatility: Evidence from economic variables and the uncertainty index," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1180-1189.
    3. Julia Kielmann & Hans Manner & Aleksey Min, 2022. "Stock market returns and oil price shocks: A CoVaR analysis based on dynamic vine copula models," Empirical Economics, Springer, vol. 62(4), pages 1543-1574, April.
    4. Umar, Zaghum & Usman, Muhammad & Choi, Sun-Yong & Rice, John, 2023. "Diversification benefits of NFTs for conventional asset investors: Evidence from CoVaR with higher moments and optimal hedge ratios," Research in International Business and Finance, Elsevier, vol. 65(C).
    5. Yang, Lu & Cui, Xue & Yang, Lei & Hamori, Shigeyuki & Cai, Xiaojing, 2023. "Risk spillover from international financial markets and China's macro-economy: A MIDAS-CoVaR-QR model," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 55-69.

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    More about this item

    Keywords

    Risk spillovers; CoVaR; GARCH; MIDAS; Vine copula;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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