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Dynamic Spillover Effects between the US Stock Volatility and China’s Stock Market Crash Risk: A TVP-VAR Approach

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  • Ping Zhang
  • Jieying Gao
  • Yanbin Zhang
  • Te-Wei Wang

Abstract

Due to the increasing linkage of China and the US stock markets today, we constructed a TVP-VAR model to study the dynamic spillover effects between the US stock volatility and China’s stock market crash risk. We found dynamic spillover effects are constantly strengthening between US stock volatility and China’s stock market crash risk: when the US stock volatility increases, China’s stock market crash risk increases. In addition, the gradual improvement of financial market openness in China, the short-term capital outflow from China, and the depreciation of the RMB exchange rate will increase China’s stock market crash risk. And, the impacts of short-term capital outflow from China are more significant. Further, the increase in China’s stock market crash risk will lead to the decline of the US stock volatility, which may be due to the flight to quality.

Suggested Citation

  • Ping Zhang & Jieying Gao & Yanbin Zhang & Te-Wei Wang, 2021. "Dynamic Spillover Effects between the US Stock Volatility and China’s Stock Market Crash Risk: A TVP-VAR Approach," Mathematical Problems in Engineering, Hindawi, vol. 2021, pages 1-12, April.
    • Handle: RePEc:hin:jnlmpe:6616577
    DOI: 10.1155/2021/6616577
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    Cited by:

    1. Yang, Tianle & Zhou, Fangxing & Du, Min & Du, Qunyang & Zhou, Shirong, 2023. "Fluctuation in the global oil market, stock market volatility, and economic policy uncertainty: A study of the US and China," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 377-387.

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