ETF connectedness and its applications: Evidence from RCEP member countries

Zhenyang Li and Yuanying Jiang

Journal of Multinational Financial Management, 2025, vol. 78, issue C

Abstract: This study investigates market linkages among the member countries of the Regional Comprehensive Economic Partnership (RCEP), focusing on Exchange-Traded Funds (ETFs) as a cross-market investment tool. Using daily ETF data from March 31, 2011, to October 1, 2024, we apply the GJR-BEKK-GARCH model and the time-varying frequency connectedness method to analyze ETF connectedness among RCEP member countries from both time-frequency and return-volatility perspectives. The results reveal significant heterogeneity in ETFs' returns and volatilities, with connectedness showing clear time-varying patterns. During economic events, risk transmission mechanisms vary, with RCEP markets showing heightened sensitivity to global shocks. Dynamic analysis of return and volatility connectedness uncovers market linkage relationships at different stages. Portfolio optimization further suggests that multi-asset ETF portfolios exhibit varying risk diversification effects under different strategies, providing valuable insights for asset allocation and risk management in a globalized market.

Keywords: Exchange-Traded Fund; RCEP; GJR-BEKK-GARCH; TVP-VAR; Connectedness (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:78:y:2025:i:c:s1042444x2500012x

DOI: 10.1016/j.mulfin.2025.100908

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