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Tail risk transmission from the United States to emerging stock Markets: Empirical evidence from multivariate quantile analysis

Author

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  • Zhang, Yi
  • Zhou, Long
  • Wu, Baoxiu
  • Liu, Fang
Abstract
This paper explores the transmission of risk from the United States equity market to the equity markets of the BRICS countries using a multivariate quantile process. The focus is on the contagion effect at the extreme quantiles, both upside and downside. In addition, a pseudo-impulse-response function (PIRF) analysis is conducted to investigate the responses of the five emerging stock markets to a shock in the US market. We conduct an empirical study against the backdrop of the COVID-19 event and the Russia-Ukraine conflict, finding that risk spillovers between the US stock market and the five emerging stock markets are significantly enhanced during the COVID-19 period. Moreover, a shock in the US market produces a stronger and more persistent negative effect at the downside quantiles compared to upside quantiles. However, we find little evidence of cross-market risk spillovers among the investigated variables during the Russia-Ukraine conflict period. We also discuss the implications of these findings for investors and policymakers in terms of portfolio holdings and policy coordination.

Suggested Citation

  • Zhang, Yi & Zhou, Long & Wu, Baoxiu & Liu, Fang, 2024. "Tail risk transmission from the United States to emerging stock Markets: Empirical evidence from multivariate quantile analysis," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:ecofin:v:73:y:2024:i:c:s1062940824000895
    DOI: 10.1016/j.najef.2024.102164
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    More about this item

    Keywords

    Extreme risk contagion; Multivariate quantile models; Pseudo-impulse-response functions; BRICS markets;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G19 - Financial Economics - - General Financial Markets - - - Other

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