Stock Market Synchronization: The Role of Geopolitical Risk

Kazi Sohag (), Rogneda Vasilyeva, Alina Urazbaeva and Valentin Voytenkov
Additional contact information
Alina Urazbaeva: Graduate School of Economics and Management, Ural Federal University, Yekaterinburg 620000, Russia
Valentin Voytenkov: Graduate School of Economics and Management, Ural Federal University, Yekaterinburg 620000, Russia

JRFM, 2022, vol. 15, issue 5, 1-15

Abstract: Given the importance of stock market synchronization for international portfolio diversification, we estimate the degrees of co-movements among US, Chinese and Russian markets. By applying the TVP-VAR approach, we measure total and bivariate synchronization indices utilizing daily data from 1998 to 2021. Our analysis demonstrates that the total connectedness index (TCI) is 26.15% among the three markets. We find that the US market is the highest volatility contributor, whereas the Russian market is the highest receiver. Since stock market synchronization is exposed to geopolitical risk, at the second stage, we apply the Quantile-on-Quantile framework to measure the response of total and bilateral connectedness indices to geopolitical risk (GPR). The findings affirm our proposition that GPR impedes TCI when it has a bullish state and a higher quantile of GPR. The response of bilateral connectedness is negative towards GPR concerning US–China and US–Russian pairs. However, the degree of connectedness between Russian and Chinese stock markets is less responsive to GPR.

Keywords: stock market synchronization; geopolitical risk; TVP-VAR; Quantile-on-Quantile (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/1911-8074/15/5/204/pdf (application/pdf)
https://www.mdpi.com/1911-8074/15/5/204/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:15:y:2022:i:5:p:204-:d:804705

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().