Spatial spillover effects and risk contagion around G20 stock markets based on volatility network
Xintian Zhuang and
Yang Lu ()
The North American Journal of Economics and Finance, 2020, vol. 51, issue C
Employing the spatial econometric model as well as the complex network theory, this study investigates the spatial spillovers of volatility among G20 stock markets and explores the influential factors of financial risk. To achieve this objective, we use GARCH-BEKK model to construct the volatility network of G20 stock markets, and calculate the Bonacich centrality to capture the most active and influential nodes. Finally, we innovatively use the volatility network matrix as spatial weight matrix and establish spatial Durbin model to measure the direct and spatial spillover effects. We highlight several key observations: there are significant spatial spillover effects in global stock markets; volatility spillover network exists aggregation effects, hierarchical structure and dynamic evolution features; the risk contagion capability of traditional financial power countries falls, while that of “financial small countries” rises; stock market volatility, government debt and inflation are positively correlated with systemic risk, while current account and macroeconomic performance are negatively correlated; the indirect spillover effects of all explanatory variables on systemic risk are greater than the direct spillover effects.
Keywords: Spatial spillover; Volatility network; Risk contagion; GARCH-BEKK model; Spatial Durbin model (search for similar items in EconPapers)
JEL-codes: C58 F37 G14 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940819302815
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