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Imported risk in global financial markets: Evidence from cross-market connectedness

Author

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  • Ouyang, Zisheng
  • Chen, Zhen
  • Zhou, Xuewei
  • Ouyang, Zhongzhe

Abstract

We propose a cross-market connectedness network, including stock market layer and foreign exchange market layer in the spillover index method for investigating imported risk in global financial markets. In addition, we explore the topology of the cross-market connectedness network at the system and market layers. We also identify the key drivers of global risk spillovers by constructing the systemic importance indicator. Meanwhile, we examine the impact of global economic policy uncertainty, geopolitical risks, and external financial conditions on imported risk of international financial markets. Our results show that risk contagion in the stock market is more pronounced than in the foreign exchange market. Furthermore, we note that advanced markets are the main recipients of global imported risk, with the Netherlands, the EU and France being the most strongly shocked to external risks. Finally, the determinants analysis suggests that geopolitical risks significantly increase imported risk in global stock markets, while external financial conditions have a driving effect on risk spillovers in foreign exchange markets.

Suggested Citation

  • Ouyang, Zisheng & Chen, Zhen & Zhou, Xuewei & Ouyang, Zhongzhe, 2025. "Imported risk in global financial markets: Evidence from cross-market connectedness," The North American Journal of Economics and Finance, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:ecofin:v:76:y:2025:i:c:s1062940825000142
    DOI: 10.1016/j.najef.2025.102374
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    Keywords

    Spillover index method; Imported risk; Risk measurement; Influencing factors;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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