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Emerging Market Contagion Under Geopolitical Uncertainty

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  • Axel Hedström
  • Nathalie Zelander
  • Juha Junttila
  • Gazi Salah Uddin

Abstract

We find that 10 emerging stock markets have high risk of contagion on the regional level but lower spillover with respect to the global markets, implying a potential for diversification benefits between emerging and global markets. Regional market integration seems to have been caused by trade integration, which has a policy implication for trade agreements’ systemic risk effects. We find that the geopolitical risk has no impact on either the return, or volatility spillovers. However, the general stock market risk (VIX) is connected to individual market volatilities, while the oil market is largely receiving the spillovers from the other markets.

Suggested Citation

  • Axel Hedström & Nathalie Zelander & Juha Junttila & Gazi Salah Uddin, 2020. "Emerging Market Contagion Under Geopolitical Uncertainty," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(6), pages 1377-1401, May.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:6:p:1377-1401
    DOI: 10.1080/1540496X.2018.1562895
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    Citations

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    Cited by:

    1. Agudelo, Diego A. & Múnera, Daimer J., 2023. "Who are the vectors of contagion? Evidence from emerging markets," International Review of Financial Analysis, Elsevier, vol. 87(C).
    2. Wang, Kai-Hua & Xiong, De-Ping & Mirza, Nawazish & Shao, Xue-Feng & Yue, Xiao-Guang, 2021. "Does geopolitical risk uncertainty strengthen or depress cash holdings of oil enterprises? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    3. Mokni, Khaled & Al-Shboul, Mohammed & Assaf, Ata, 2021. "Economic policy uncertainty and dynamic spillover among precious metals under market conditions: Does COVID-19 have any effects?," Resources Policy, Elsevier, vol. 74(C).
    4. Dang, Tam Hoang Nhat & Balli, Faruk & Balli, Hatice Ozer & Gabauer, David & Nguyen, Thi Thu Ha, 2024. "Sectoral uncertainty spillovers in emerging markets: A quantile time–frequency connectedness approach," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 121-139.
    5. Lee, Chien-Chiang & Wang, Chih-Wei, 2021. "Firms' cash reserve, financial constraint, and geopolitical risk," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
    6. Batten, Jonathan A. & Bilgin, Mehmet Huseyin & Demir, Ender & Gozgor, Giray, 2023. "Does globalization affect credit market controls?," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 21-43.
    7. Hao, Xinlei & Ma, Yong & Pan, Dongtao, 2024. "Geopolitical risk and the predictability of spillovers between exchange, commodity and stock markets," Journal of Multinational Financial Management, Elsevier, vol. 73(C).
    8. Salachas, Evangelos & Kouretas, Georgios P. & Laopodis, Nikiforos T. & Vlamis, Prodromos, 2024. "Stock market spillovers of global risks and hedging opportunities," European Journal of Political Economy, Elsevier, vol. 83(C).
    9. Muhammad Abubakr Naeem & Saqib Farid & Fiza Qureshi & Farhad Taghizadeh‐Hesary, 2023. "Global factors and the transmission between United States and emerging stock markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3488-3510, October.
    10. Mohammad Enamul Hoque & Mohd Azlan Shah Zaidi & M. Kabir Hassan, 2021. "Geopolitical Uncertainties and Malaysian Stock Market Returns: Do Market Conditions Matter?," Mathematics, MDPI, vol. 9(19), pages 1-16, September.
    11. Niu, Zibo & Wang, Chenlu & Zhang, Hongwei, 2023. "Forecasting stock market volatility with various geopolitical risks categories: New evidence from machine learning models," International Review of Financial Analysis, Elsevier, vol. 89(C).
    12. Sohag, Kazi & Hammoudeh, Shawkat & Elsayed, Ahmed H. & Mariev, Oleg & Safonova, Yulia, 2022. "Do geopolitical events transmit opportunity or threat to green markets? Decomposed measures of geopolitical risks," Energy Economics, Elsevier, vol. 111(C).

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