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The dynamic volatility transmission in the multiscale spillover network of the international stock market

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  • Liu, Xueyong
  • Jiang, Cheng

Abstract

Describing the characteristics of volatility contagion in the financial market is beneficial to market participants and regulators capturing market information and preventing a wide range of financial crises. We proposed a novel propagation model by introducing a dimension of intensity to the traditional discrete virus propagation model. Several indexes are constructed to describe the simulation results. The main contribution of this paper is a novel research framework proposed for studying the nonlinear dynamics process of volatility contagion among directed weighted spillover networks; this framework can enrich the research on the prevention and control of volatility transmission in financial networks. The results show the heterogeneity of volatility propagation at the microscopic level at different scales, and the risk of volatility diffusion is high in the early steps and then decreases rapidly. The results can provide a reference for investors with heterogeneous strategies at different time scales.

Suggested Citation

  • Liu, Xueyong & Jiang, Cheng, 2020. "The dynamic volatility transmission in the multiscale spillover network of the international stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 560(C).
    • Handle: RePEc:eee:phsmap:v:560:y:2020:i:c:s0378437120305987
    DOI: 10.1016/j.physa.2020.125144
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    3. Bouri, Elie & Harb, Etienne, 2022. "The size of good and bad volatility shocks does matter for spillovers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).

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