Global geopolitical risk and volatility connectedness among China's sectoral stock markets

Changchun Pan, Weiqi Zhang and Weiqiang Wang

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: Employing the time-varying parameter vector autoregressive (TVP-VAR) connectedness index and nonparametric causality-in-quantiles test, this paper investigates the causal effect of global geopolitical risk on the dynamic volatility connectedness within China's sectoral stock markets. The TVP-VAR connectedness index results reveal significant volatility connectedness among China's stock market sectors, and the industrial, consumer discretionary, and raw material sectors play a critical systemic role throughout the sample period. The Granger causality test results show that the causality-in-quantiles test demonstrates superior performance compared to the linear Granger causality test, and it is evident that global geopolitical risk exhibits significant nonlinear causality effects on both the overall volatility connectedness among sectors and the net volatility connectedness across different sectors.

Keywords: Global geopolitical risk; Stock market sectors; TVP-VAR connectedness index; Causality-in-quantiles test (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323008590

DOI: 10.1016/j.frl.2023.104487

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