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Heterogeneous Spillover Networks and Spatial–Temporal Dynamics of Systemic Risk Transmission: Evidence from G20 Financial Risk Stress Index

Author

Listed:
  • Xing Wang

    (Faculty of Social Science, The Chinese University of Hong Kong, Hong Kong, China
    These authors contributed equally to this work.)

  • Jiahui Zhang

    (School of Management and Economics, The Chinese University of Hong Kong, Shenzhen 518100, China
    These authors contributed equally to this work.)

  • Xiaolong Chen

    (Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao 999078, China
    These authors contributed equally to this work.)

  • Hongfeng Zhang

    (Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao 999078, China)

  • Cora Un In Wong

    (Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao 999078, China)

  • Thomas Chan

    (School of Social Sciences, University of Manchester, Manchester M13 9PL, UK
    These authors contributed equally to this work.)

Abstract

With the continuous integration of globalization and financial markets, the linkage of global financial risks has increased significantly. This study examines the risk spillover effects and transmission dynamics among the financial markets in G20 countries, which together represent over 80% of global GDP. With increasing globalization and the interconnectedness of financial markets, understanding risk transmission mechanisms has become critical for effective risk management. Previous research has primarily focused on price volatility to measure financial risks, often overlooking other critical dimensions such as liquidity, credit, and operational risks. This paper addresses this gap by utilizing the vector autoregressive (VAR) model to explore the spillover effects and the temporal and spatial characteristics of risk transmission. Specifically, we employ global and local Moran indices to analyze spatial dependencies across markets. Our findings reveal that the risk linkages among the G20 financial markets exhibit significant time-varying characteristics, with spatial risk distribution showing weaker dispersion. By constructing a comprehensive financial risk index system and applying a network-based spillover analysis, this study enhances the measurement of financial market risk and uncovers the complex transmission pathways between sub-markets and countries. These results not only deepen our understanding of global financial market dynamics but also provide valuable insights for the design of effective cross-border financial regulatory policies. The study’s contributions lie in enriching the empirical literature on multi-dimensional financial risks, advancing policy formulation by identifying key risk transmission channels, and supporting international risk management strategies through the detection and mitigation of potential contagion effects.

Suggested Citation

  • Xing Wang & Jiahui Zhang & Xiaolong Chen & Hongfeng Zhang & Cora Un In Wong & Thomas Chan, 2025. "Heterogeneous Spillover Networks and Spatial–Temporal Dynamics of Systemic Risk Transmission: Evidence from G20 Financial Risk Stress Index," Mathematics, MDPI, vol. 13(8), pages 1-20, April.
    • Handle: RePEc:gam:jmathe:v:13:y:2025:i:8:p:1353-:d:1639101
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    References listed on IDEAS

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