How do leading stock markets in America and Europe connect to Asian stock markets? Quantile dynamic connectedness

OlaOluwa S. Yaya; Miao Zhang; Han Xi; Fumitaka Furuoka; OlaOluwa S. Yaya; Miao Zhang; Han Xi; Fumitaka Furuoka

doi:10.3934/QFE.2024019

Quantitative Finance and Economics

2024, Volume 8, Issue 3: 502-531. doi: 10.3934/QFE.2024019

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Research article

How do leading stock markets in America and Europe connect to Asian stock markets? Quantile dynamic connectedness

1.
Economic and Finance Statistics Unit, University of Ibadan, Ibadan, Nigeria
2.
School of International Relations, Xiamen University, Xiamen, China
3.
Asia-Europe Institute, University of Malaya, Kuala Lumpur, Malaysia

Received: 06 February 2024 Revised: 24 July 2024 Accepted: 06 August 2024 Published: 08 August 2024
JEL Codes: G12, G15, C22

We used the quantile vector autoregressive (QVAR) dynamic connectedness framework to examine whether leading stock markets in America and Europe would have any impact on major stock markets in Asia.¹ More precisely, we analyzed systematically the stock market connectedness in 15 countries, namely Germany, the UK, the USA, and 12 Asian countries, which include five major ASEAN countries, namely Indonesia, Malaysia, Philippines, Singapore, and Thailand from 1996 to 2023. The findings indicated that Hong Kong and Singaporean stocks were major transmitters of financial shocks at the extreme low price market condition, while Germany and UK were minor transmitters. By contrast, the USA could be considered the major transmitter of financial shock during the extreme high market price returns condition. In the normal market condition, these three countries in Europe and America are important transmitters of financial shock. More interestingly, the empirical findings indicated the centrality of Singapore in the stock market connectedness in Asia.
¹ The authors are grateful to Professor David Gabauer who makes available the R codes for all calculations in this paper.
- stock market connectedness,
- Asia,
- Europe,
- America,
- Quantile method,
- extreme high market price returns
Citation: OlaOluwa S. Yaya, Miao Zhang, Han Xi, Fumitaka Furuoka. How do leading stock markets in America and Europe connect to Asian stock markets? Quantile dynamic connectedness[J]. Quantitative Finance and Economics, 2024, 8(3): 502-531. doi: 10.3934/QFE.2024019

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Abstract

We used the quantile vector autoregressive (QVAR) dynamic connectedness framework to examine whether leading stock markets in America and Europe would have any impact on major stock markets in Asia.¹ More precisely, we analyzed systematically the stock market connectedness in 15 countries, namely Germany, the UK, the USA, and 12 Asian countries, which include five major ASEAN countries, namely Indonesia, Malaysia, Philippines, Singapore, and Thailand from 1996 to 2023. The findings indicated that Hong Kong and Singaporean stocks were major transmitters of financial shocks at the extreme low price market condition, while Germany and UK were minor transmitters. By contrast, the USA could be considered the major transmitter of financial shock during the extreme high market price returns condition. In the normal market condition, these three countries in Europe and America are important transmitters of financial shock. More interestingly, the empirical findings indicated the centrality of Singapore in the stock market connectedness in Asia.

¹ The authors are grateful to Professor David Gabauer who makes available the R codes for all calculations in this paper.

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