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Quantifying the international stock market risk spillover: An analysis based on G-expectation upper variances

Author

Listed:
  • Cai, Yi
  • Tang, Zhenpeng
  • Chen, Kaijie
  • Liu, Dinggao

Abstract

This study proposes a combination model to assess upper variance spillover effects in 14 stock markets. By integrating G-normal distribution model and the connectedness approach, we measure spillover effects and compute upper variance. Empirical findings reveal that developed countries (e.g., Britain, France, Germany) contribute more to upper variance risk, while developing countries (e.g., Philippines, Brazil, Indonesia) receive it. During the crisis, the total spillover index increases from 24.81% to 66.01%. French and German stock markets' spillover rises by 144.21% and 44.94% respectively, while China's spillover is relatively smaller. Dynamic upper variance exhibits an upward trend, sensitive to major economic shocks.

Suggested Citation

  • Cai, Yi & Tang, Zhenpeng & Chen, Kaijie & Liu, Dinggao, 2023. "Quantifying the international stock market risk spillover: An analysis based on G-expectation upper variances," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323007183
    DOI: 10.1016/j.frl.2023.104346
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    References listed on IDEAS

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    More about this item

    Keywords

    Upper variance spillover; G-expectation theory; Connectedness approach; Dynamic analysis;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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