Spillover effects from China and the United States to Key Regional Emerging Markets: A dynamic analysis

Lumengo Bonga-Bonga and Salifya Mpoha

International Review of Financial Analysis, 2024, vol. 91, issue C

Abstract: While a limited number of studies have employed wavelet techniques to distinguish between market interdependence and contagion within the context of market co-movement, many of them have primarily relied on conclusions derived from multivariate wavelet analysis. In contrast, this paper introduces a complementary approach based on the univariate wavelet technique, specifically the Maximal Overlap Discrete Wavelet Transform (MODWT). This approach entails assessing the correlation between key market series that have been decomposed into both the time and frequency domains. The proposed technique is applied to evaluate the co-movement and dynamic spillover effects from two prominent advanced markets, namely China and the United States, to six major emerging economies across different regions. The findings obtained through various wavelet techniques consistently support the notion that interdependence is the predominant characteristic in terms of shock spillovers and stock market co-movement between the selected advanced and key emerging markets. Furthermore, the results indicate that both the US and China cycles are synchronized with those of the key emerging economies. These insights are of significant importance for investors and asset managers, offering valuable guidance for asset diversification and portfolio allocation strategies during both tranquil and turbulent periods.

Keywords: Contagion; Interdependence; Wavelet analysis; Emerging economies; Advanced economies (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521923005318
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:91:y:2024:i:c:s1057521923005318

DOI: 10.1016/j.irfa.2023.103015

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().