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Volatility Spillovers During the Chinese Stock Market Crisis: A MEM-Based Approach

Author

Listed:
  • Hua Chen

    (National Council for Social Security Fund, South Tower, Building 11, Fenghuiyuan Fenghui Times Building, Xicheng District, Beijing 100032, P. R. China)

  • Domenico Tarzia

    (Peking University HSBC Business School, University Town, Nanshan District, Shenzhen 518055, Guangdong, P. R. China)

  • Giovanni Vittorino

    (Bank of Italy, Embassy of Italy in New Delhi, 50-E Chandragupta Marg, Chanakyapuri 110021, New Delhi, India)

  • Andros Gregoriou

    (University of Brighton, Brighton, BN2 4AT, UK)

Abstract

We study volatility spillovers from the Chinese A-share market to four Asia-Pacific (APAC) markets and three global markets during the Chinese stock market crisis. We make use of a nonlinear model and determine that volatility spillovers tend to be regional, posing greater risks to the region than elsewhere. We show that, during the crisis, the Chinese stock market is more integrated in the APAC region. We find no evidence of asymmetric effects and exclude short-run effects of the national team established by the Chinese authorities. We construct a volatility spillover balance and find that, during the financial turbulence, mainland China changes its status from being volatility spillover receiver to volatility generator.

Suggested Citation

  • Hua Chen & Domenico Tarzia & Giovanni Vittorino & Andros Gregoriou, 2022. "Volatility Spillovers During the Chinese Stock Market Crisis: A MEM-Based Approach," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 25(04), pages 1-30, December.
    • Handle: RePEc:wsi:rpbfmp:v:25:y:2022:i:04:n:s021909152250031x
    DOI: 10.1142/S021909152250031X
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    Keywords

    Financial contagion; multiplicative-error model; volatility spillover balance;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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