EconPapers    
Economics at your fingertips  
 

Effect of the U.S.–China Trade War on Stock Markets: A Financial Contagion Perspective

Minseog Oh and Donggyu Kim

Journal of Financial Econometrics, 2024, vol. 22, issue 4, 954-1005

Abstract: In this article, to model risk contagion between the U.S. and China stock markets based on high-frequency financial data, we develop a novel continuous-time jump-diffusion process. For example, we consider three channels for volatility contagion—such as integrated volatility, positive jump variation, and negative jump variation—and each stock market is able to affect the other stock market as an overnight risk factor. We develop a quasi-maximum likelihood estimator for model parameters and establish its asymptotic properties. Furthermore, to identify contagion channels and test the existence of a structural break with a known structural break date, we propose hypothesis test procedures. Using the proposed diffusion model with high-frequency financial data, we investigate the effect of the U.S.–China trade war on stock markets from a financial contagion perspective. From the empirical study, we find evidence of financial contagion from the United States to China and evidence that the risk contagion channel has changed from integrated volatility to negative jump variation.

Keywords: high-frequency financial data; jump diffusion process; realized volatility; structural break (search for similar items in EconPapers)
JEL-codes: C13 C32 C55 C58 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/jjfinec/nbad016 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Effect of the U.S.--China Trade War on Stock Markets: A Financial Contagion Perspective (2021) Downloads
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:oup:jfinec:v:22:y:2024:i:4:p:954-1005.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani

More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2025-03-19
Handle: RePEc:oup:jfinec:v:22:y:2024:i:4:p:954-1005.