The Path of Financial Risk Spillover in the Stock Market Based on the R-Vine-Copula Model

• DOI: 10.2139/ssrn.4019499
• Publication Date: 2022-02-18T03:33:02Z
• Authors: Xiaoming Zhang; Tong Zhang; Chien-Chiang Lee
• Keywords: Vine copula; Spillover effect; Model risk; Market risk; Vine

This research focuses on the direct and indirect systemic risk spillovers among East Asian, European, U.S. stock markets under COVID-19 pandemic. Based GARCH-Copula-CoVaR model, we construct spillover matrix of further explore path through R-vine. The empirical results first show in that Hong Kong exhibited largest change value after pandemic erupted, implying market is more sensitive to extreme events. Compared quiet period, Russia’s output increased significantly pandemic, environment intensified correlation between Russia other capital markets. Second, long run European risks are transmitted China domestically via Japan, while Germany transmits Japan. centrality France weak, Germany’s greater. Lastly, situation aggravated which as important intermediate nodes connected transmission Europe, China.