Tail risk transmission from the United States to emerging stock markets : empirical evidence from multivariate quantile analysis

Zhang, Yi and Zhou, Long and Wu, Baoxiu and Liu, Fang (2024) Tail risk transmission from the United States to emerging stock markets : empirical evidence from multivariate quantile analysis. North American Journal of Economics and Finance, 73. 102164. ISSN 1062-9408 (https://doi.org/10.1016/j.najef.2024.102164)

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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.

ORCID iDs

Zhang, Yi, Zhou, Long ORCID logoORCID: https://orcid.org/0000-0001-9687-1406, Wu, Baoxiu and Liu, Fang;