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Dynamics of Contagion Risk Among World Markets in Times of Crises: A Financial Network Perspective

Author

Listed:
  • Karim Belcaid

    (Ministry of Economy and Finance
    Mohammed V University)

  • Sara El Aoufi

    (Ibn Tofail University)

  • Mamdouh Abdulaziz Saleh Al-Faryan

    (University of Portsmouth
    Consultant in Economics and Finance)

Abstract

This study used a Time-Varying Parameter VAR approach to analyze contagion risk among global stock markets and WTI crude oil during times of crisis. The examined markets included the United States, the Eurozone, the United Kingdom, China, Japan, India, Russia, and select MENA stock markets. The research highlighted the importance of dynamic metrics in assessing financial networks and crisis contagion risk, an area that has received limited attention in previous studies. The evidence demonstrates rapid and dynamic financial contagion resulting from lockdown measures, the spread of COVID-19, and the Russia–Ukraine war. The U.S. and major European markets were identified as net global contributors, while Chinese and MENA equity markets acted as net receivers. Furthermore, the origin of oil shocks was more likely attributed to Russian and Saudi markets. This research carries policy implications for policymakers and investors, emphasizing the importance of shock and contagion effects in portfolio diversification and risk hedging, particularly during times of crisis.

Suggested Citation

  • Karim Belcaid & Sara El Aoufi & Mamdouh Abdulaziz Saleh Al-Faryan, 2024. "Dynamics of Contagion Risk Among World Markets in Times of Crises: A Financial Network Perspective," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(4), pages 1007-1033, December.
    • Handle: RePEc:kap:apfinm:v:31:y:2024:i:4:d:10.1007_s10690-023-09439-2
    DOI: 10.1007/s10690-023-09439-2
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    More about this item

    Keywords

    Contagion risk; Global financial network; Major world markets; WTI oil index; COVID-19; Ukraine–Russia crisis;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • 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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