Risk Transmission and Hedging Strategies Between Chinese Stock Market and Major Trading Partners Along the Belt and Road in COVID-19 Scenario
This paper focuses on the multi-scale spillover and time-varying dependence of Chinese stock market and its important trading partners along the Belt and Road around the COVID-19 crisis. We use multiple methods - the DY (12) and BK (18) connectedness approaches that investigate dynamic and frequency...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Pompea College of Business
2024-11-01
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| Series: | American Business Review |
| Subjects: | |
| Online Access: | https://digitalcommons.newhaven.edu/americanbusinessreview/vol27/iss2/1/ |
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| Summary: | This paper focuses on the multi-scale spillover and time-varying dependence of Chinese stock market and its important trading partners along the Belt and Road around the COVID-19 crisis. We use multiple methods - the DY (12) and BK (18) connectedness approaches that investigate dynamic and frequency connectedness; the wavelet coherence and the time-varying CoVaR to examine the connection between price lead lags and systemic risk spillovers. Our empirical results show spillovers to be asymmetric, and short-term spillovers dominating. Meanwhile, the level of spillover in the system increased sharply after the COVID-19. In the medium and long-term frequency domains, wavelet coherence reveals strong co-movement between the Chinese market and its major trading partners. We see that the highest level of systematic risk spillovers occurs at the beginning of the COVID-19 outbreak. Finally, the weighting of the Chinese stock market in the effective portfolio rises after the COVID-19 outbreak. |
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| ISSN: | 0743-2348 2689-8810 |