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Non-linear Spillover of External EPU on Macau Gaming Stock Volatility: Micro-foundations using TVP-VAR and ML Attribution

Author

Listed:
  • Ji, Zihao
  • Wang, Guan
  • Hu, Chenxi
  • Zhang, Hongru

Abstract

This paper examines the non-linear transmission of external Economic Policy Uncertainty to the volatility of Macau gaming stocks. By combining a TVP-VAR-DY framework with XGBoost and SHAP machine learning attribution, we map the dynamic risk spillovers originating from Mainland China, Hong Kong, and the United States. The empirical results reveal a dual risk topology: regional regulatory shocks manifest as transient, high-intensity pulses (episodic), whereas global systemic uncertainty exhibits a chronic structural persistence that determines the baseline volatility regime. Furthermore, our machine learning analysis reveals that firm resilience depends on specific micro-financial foundations. We find that operating profitability effectively buffers external shocks, whereas financial leverage significantly amplifies them. The study uncovers precise structural tipping points, identifying a sharp increase in risk sensitivity when the debt-to-asset ratio exceeds 80% and determining an optimal liquidity buffer at approximately 15% cash-to-assets. These findings challenge traditional linear assumptions and support the adoption of threshold-based macro-prudential regulations for the sector.

Suggested Citation

  • Ji, Zihao & Wang, Guan & Hu, Chenxi & Zhang, Hongru, 2026. "Non-linear Spillover of External EPU on Macau Gaming Stock Volatility: Micro-foundations using TVP-VAR and ML Attribution," MPRA Paper 128532, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:128532
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    References listed on IDEAS

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    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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