The path of financial risk spillover in the stock market based on the R-vine-Copula model

Xiaoming Zhang, Tong Zhang and Chien-Chiang Lee ()

Physica A: Statistical Mechanics and its Applications, 2022, vol. 600, issue C

Abstract: This research focuses on the direct and indirect systemic risk spillovers among East Asian, European, and U.S. stock markets under the COVID-19 pandemic. Based on the GARCH-Copula-CoVaR model, we construct the direct spillover matrix of systemic risk and further explore the indirect spillover path through R-vine. The empirical results first show via the direct path that Hong Kong exhibited the largest change in value of risk after the pandemic erupted. Second, the indirect path is that European and U.S. stock market risks are transmitted to China domestically via Hong Kong and Japan. The key nodes provide reference for risk prevention.

Keywords: Systemic financial risk; GARCH Copula CoVaR; R-complex correlation; COVID-19 pandemic; Spillover (search for similar items in EconPapers)
JEL-codes: C58 D81 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:600:y:2022:i:c:s0378437122003430

DOI: 10.1016/j.physa.2022.127470

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