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Volatility Spillovers of Stock Markets between China and the Countries along the Belt and Road

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  • Wanbo Lu
  • Yuxuan Gao
  • Xiaoyi Huang

Abstract

This article intensively studies the stock market volatility spillover effects between China and the countries along the Belt and Road (B&R) based on the covered selection of Morgan Stanley Capital International Inc (MSCI) index by using multiplicative error model to measure stock market volatility with daily price range. The results show that during the whole sample period, there are bilateral linkages of volatility between the stock markets of China and all of B&R countries. Most of B&R and China’s markets are sensitive to positive news but the asymmetry is trivial. Financial crisis intensified the volatility spillover effects across countries while the markets’ volatilities tend to be influenced by the negative shocks from foreign markets. The B&R markets as risk absorbers exhibit significant sensitivities to the negative news from Chinese market during the crisis period.

Suggested Citation

  • Wanbo Lu & Yuxuan Gao & Xiaoyi Huang, 2019. "Volatility Spillovers of Stock Markets between China and the Countries along the Belt and Road," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(14), pages 3311-3331, November.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:14:p:3311-3331
    DOI: 10.1080/1540496X.2019.1570496
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    Cited by:

    1. Hannes Thees, 2020. "Towards Local Sustainability of Mega Infrastructure: Reviewing Research on the New Silk Road," Sustainability, MDPI, vol. 12(24), pages 1-35, December.
    2. Dai, Zhifeng & Zhu, Haoyang, 2022. "Time-varying spillover effects and investment strategies between WTI crude oil, natural gas and Chinese stock markets related to belt and road initiative," Energy Economics, Elsevier, vol. 108(C).
    3. Naeem, Muhammad Abubakr & Yousaf, Imran & Karim, Sitara & Yarovaya, Larisa & Ali, Shoaib, 2023. "Tail-event driven NETwork dependence in emerging markets," Emerging Markets Review, Elsevier, vol. 55(C).
    4. Mikhail I. Stolbov & Maria A. Shchepeleva & Alexander M. Karminsky, 2021. "A global perspective on macroprudential policy interaction with systemic risk, real economic activity, and monetary intervention," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-25, December.
    5. Sin Yee Lee & Zulkefly Abdul Karim & Norlin Khalid & Mohd Azlan Shah Zaidi, 2022. "The Spillover Effects of Chinese Shocks on the Belt and Road Initiative Economies: New Evidence Using Panel Vector Autoregression," Mathematics, MDPI, vol. 10(14), pages 1-18, July.
    6. Muhammad Niaz Khan & Suzanne G. M. Fifield & Nongnuch Tantisantiwong & David M. Power, 2022. "Changes in co-movement and risk transmission between South Asian stock markets amidst the development of regional co-operation," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(1), pages 87-117, March.
    7. Sha, Yezhou & Song, Weijia, 2021. "Can Bitcoin hedge Belt and Road equity markets?," Finance Research Letters, Elsevier, vol. 42(C).

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