Dynamics of Contagion Risk Among World Markets in Times of Crises: A Financial Network Perspective

Karim Belcaid (), Sara El Aoufi () and Mamdouh Abdulaziz Saleh Al-Faryan ()
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Karim Belcaid: Ministry of Economy and Finance
Sara El Aoufi: Ibn Tofail University
Mamdouh Abdulaziz Saleh Al-Faryan: University of Portsmouth

Asia-Pacific Financial Markets, 2024, vol. 31, issue 4, No 9, 1007-1033

Abstract: Abstract This study used a Time-Varying Parameter VAR approach to analyze contagion risk among global stock markets and WTI crude oil during times of crisis. The examined markets included the United States, the Eurozone, the United Kingdom, China, Japan, India, Russia, and select MENA stock markets. The research highlighted the importance of dynamic metrics in assessing financial networks and crisis contagion risk, an area that has received limited attention in previous studies. The evidence demonstrates rapid and dynamic financial contagion resulting from lockdown measures, the spread of COVID-19, and the Russia–Ukraine war. The U.S. and major European markets were identified as net global contributors, while Chinese and MENA equity markets acted as net receivers. Furthermore, the origin of oil shocks was more likely attributed to Russian and Saudi markets. This research carries policy implications for policymakers and investors, emphasizing the importance of shock and contagion effects in portfolio diversification and risk hedging, particularly during times of crisis.

Keywords: Contagion risk; Global financial network; Major world markets; WTI oil index; COVID-19; Ukraine–Russia crisis (search for similar items in EconPapers)
JEL-codes: C58 F36 F65 G15 G32 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10690-023-09439-2

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