Tail risk transmission from the United States to emerging stock Markets: Empirical evidence from multivariate quantile analysis

Yi Zhang, Long Zhou, Baoxiu Wu and Fang Liu

The North American Journal of Economics and Finance, 2024, vol. 73, issue C

Abstract: This paper explores the transmission of risk from the United States equity market to the equity markets of the BRICS countries using a multivariate quantile process. The focus is on the contagion effect at the extreme quantiles, both upside and downside. In addition, a pseudo-impulse-response function (PIRF) analysis is conducted to investigate the responses of the five emerging stock markets to a shock in the US market. We conduct an empirical study against the backdrop of the COVID-19 event and the Russia-Ukraine conflict, finding that risk spillovers between the US stock market and the five emerging stock markets are significantly enhanced during the COVID-19 period. Moreover, a shock in the US market produces a stronger and more persistent negative effect at the downside quantiles compared to upside quantiles. However, we find little evidence of cross-market risk spillovers among the investigated variables during the Russia-Ukraine conflict period. We also discuss the implications of these findings for investors and policymakers in terms of portfolio holdings and policy coordination.

Keywords: Extreme risk contagion; Multivariate quantile models; Pseudo-impulse-response functions; BRICS markets (search for similar items in EconPapers)
JEL-codes: G11 G15 G19 G31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:73:y:2024:i:c:s1062940824000895

DOI: 10.1016/j.najef.2024.102164

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