Environmental factors and financial market spillover

We investigate the impact of environmental factors (EFs) on financial market spillovers across 62 global benchmark stock indices. We find that EFs from origin and destination countries have asymmetric effects on financial market spillovers between them, and these impacts are primarily mediated through economic fundamentals. The observed asymmetries are well-explained by the industrialization-agriculturalization dichotomy: highly industrialized countries tend to exert stronger spillover effects as origin countries and are less affected as receivers, while more agriculturalized countries exhibit weaker spillover effects as origin countries and are more susceptible as receivers. These findings hold for both return and volatility spillovers.