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Risk spillover networks in financial markets: Evidence from emerging markets

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  • Yujia Jin
  • Ailian Zhang
  • Bai Liu

Abstract

This paper empirically explores dynamic risk impact of extreme volatility between stock and foreign exchange markets in emerging markets. Based on CoVaR analysis, we construct networks to investigate the nonlinear and dynamic evolution characteristics of risk contagion. The results show that stock and foreign exchange markets exhibit asymmetric tail dependence. All networks present small world network characteristics. The risk tolerance impact is more noticeable than risk overflow and stock markets are more sensitive to risk contagion. In the minimum spanning tree (MST), Korean stock market and foreign exchange markets of India and China are critical nodes in the minimum path of risk overflow.

Suggested Citation

  • Yujia Jin & Ailian Zhang & Bai Liu, 2023. "Risk spillover networks in financial markets: Evidence from emerging markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(6), pages 3086-3107, September.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:6:p:3086-3107
    DOI: 10.1002/mde.3865
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