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Connectedness of Uncertainty, Volatility, and Stock Market Performance

Author

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  • Szczepan Urjasz

    (University of Warsaw, Poland)

Abstract

This study examines the dynamic connectedness and spillover effects among various financial and economic indicators, including uncertainty indices, market volatility, and stock market indices, from 3 June 2008, to 30 December 2024. This interconnectedness implies that shocks originating in one market or asset class can rapidly transmit to others, underscoring the potential for systemic risk and financial contagion. The US emerges as a significant net transmitter of influence within the global financial system, with the VIX playing a crucial role in influencing global financial conditions. Major European equity markets also transmit influence, while the Geopolitical Risk Index (GRI) and the Economic Policy Uncertainty Index (EPUI) are primarily influenced by the broader financial system. Total connectedness varies over time, spiking during periods of economic distress, and volatility indices exhibit positive net connectedness during periods of financial stress, indicating their role as significant sources of volatility transmission.

Suggested Citation

  • Szczepan Urjasz, 2025. "Connectedness of Uncertainty, Volatility, and Stock Market Performance," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(24), pages 113-134.
    • Handle: RePEc:sgm:jbfeuw:v:2:y:2025:i:24:p:113-134
    DOI: 10.7172/2353-6845.jbfe.2025.2.7
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    File URL: https://press.wz.uw.edu.pl/jbfe/vol2025/iss2/7/
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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