The dynamic interdependence structure and risk spillover effect between Sino-US stock markets

Menggen Chen and Yuanren Zhou

International Journal of Emerging Markets, 2022, vol. 19, issue 10, 2734-2777

Abstract: Purpose - The purpose of this paper is to explore the dynamic interdependence structure and risk spillover effect between the Chinese stock market and the US stock market. Design/methodology/approach - This paper mainly uses the multivariate R-vine copula-complex network analysis and the multivariate R-vine copula-CoVaR model and selects stock price indices and their subsector indices as samples. Findings - The empirical results indicate that the Energy, Materials and Financials sectors have leading roles in the interdependent structure of the Chinese and US stock markets, while the Utilities and Real Estate sectors have the least important positions. The comprehensive influence of the Chinese stock market is similar to that of the US stock market but with smaller differences in the influence of different sectors of the US stock market on the overall interdependent structure system. Over time, the interdependent structure of both stock markets changed; the sector status gradually equalized; the contribution of the same sector in different countries to the interdependent structure converged; and the degree of interaction between the two stock markets was positively correlated with the degree of market volatility. Originality/value - This paper employs the methods of nonlinear cointegration and the R-vine copula function to explore the interactive relationship and risk spillover effect between the Chinese stock market and the US stock market. This paper proposes the R-vine copula-complex network analysis method to creatively construct the interdependent network structure of the two stock markets. This paper combines the generalized CoVaR method with the R-vine copula function, introduces the stock market decline and rise risk and further discusses the risk spillover effect between the two stock markets.

Keywords: Stock markets; Interdependence structure; Risk spillover; F37; G15; O16 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-04-2022-0654

DOI: 10.1108/IJOEM-04-2022-0654

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