The role of international and domestic investors in international market information spillover effects: Evidence from interconnected multilayer networks

Songsong Li, Hao Xu, Piet Sercu, Nan Xu and Yiwa Xu

The North American Journal of Economics and Finance, 2025, vol. 80, issue C

Abstract: This research introduces a novel framework to explore international information spillovers in stock markets like China, focusing on three layers: international capital markets, investor behavior, and domestic sector indices. Intra-layer connections are analyzed using TVP-VAR optimized frequency connectivity, while inter-layer connections are examined through causality tests, as well as a complex network approach evaluates the significance of investor groups. Our findings reveal that international investors’ selling behavior significantly impacts both domestic and foreign investors in the Chinese market, influenced by domestic stock sentiment. Notable peaks in network dynamics occurred in 2016, 2018, and 2020. The US and UK are major information spillover exporters, affecting sectors like industrials and materials in domestic markets. International market volatility increases short-term domestic investor attention and long-term asset shifts, leading to information spillovers in Chinese stocks. During events like the Sino-US trade war and COVID-19, international capital flows serve as a crucial channel between markets, with short-term impacts being more severe.

Keywords: Interconnected multilayer networks; International spillover inflow; Equity investors; Causality test (search for similar items in EconPapers)
JEL-codes: C32 F65 G01 G10 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:80:y:2025:i:c:s1062940825001056

DOI: 10.1016/j.najef.2025.102465

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