Asymmetries in risk spillovers between currency and stock markets: Evidence from the CoVaR-copula approach

Yi-Chiuan Wang (), Yi-hao Lai () and Jyh-Lin Wu ()
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Yi-Chiuan Wang: Tunghai University
Yi-hao Lai: Dayeh University
Jyh-Lin Wu: National Sun Yat-Sen University

Review of Quantitative Finance and Accounting, 2024, vol. 63, issue 3, No 10, 1083-1119

Abstract: Abstract We estimate conditional value-at-risk (CoVaR) for stock and currency markets under different market statuses and then apply them to study the asymmetry of risk spillovers between currency and stock markets under different market statuses. Empirical results show that risk spillovers between different statuses in stock and currency markets are significant and asymmetric. Next, for most countries, the scale and volatility of CoVaR are more prominent when return-chasing effects, rather than portfolio rebalancing effects, dominate. Finally, when stock prices in major industrial countries fall sharply or currencies depreciate significantly, investing in Japanese stocks is relatively safe for U.S. investors.

Keywords: Exchange rates; Stock prices; Risk spillovers; Copula; CoVaR (search for similar items in EconPapers)
JEL-codes: C58 F31 G15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11156-024-01285-1

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