TY - JOUR
T1 - Extreme dependence and spillovers between uncertainty indices and stock markets
T2 - Does the US market play a major role?
AU - Mensi, Walid
AU - Kamal, Md Rajib
AU - Vinh Vo, Xuan
AU - Hoon Kang, Sang
N1 - Publisher Copyright:
© 2023 Elsevier Inc.
PY - 2023/9
Y1 - 2023/9
N2 - This study investigates the spillovers and connectedness between uncertainty indices of oil gold, and stock (VIX), the economic policy uncertainty (EPU) and international stock markets (US, EU, UK, Japan, China, and Vietnam) under bearish, normal, and bullish market conditions. We employ a cross-quantilogram and quantile connectedness approach to investigate the contemporaneous linkages and asymmetries among stock markets under various financial market uncertainty. Using the cross-quantilogram approach, we find strong cross-quantilogram dependencies from the US stock market to other markets, even after controlling for the uncertainties. We find greater spillovers under volatile market conditions—bearish and bullish—than under stable market conditions using the quantile connectedness approach. The financial volatility or uncertainty indices are net transmitter (receiver) of spillover in the stock markets, especially in the bearish and tranquil (bullish) market status. Furthermore, all markets and the uncertainty indices except the US, Europe, and the UK are net receivers of spillovers in the lower quantile, while VIX uncertainty index shifts to being a net transmitter of spillovers in the lower and median quantiles. In the upper quantile, Japanese stock market and the uncertainty indices are net receivers of spillovers. VIX is strongly linked to the US (Chinese) market in tranquil (bullish) market conditions. In addition, the maximum amount of spillovers was attained during the beginning of 2020, coinciding with the onset of the COVID-19 pandemic's first wave.
AB - This study investigates the spillovers and connectedness between uncertainty indices of oil gold, and stock (VIX), the economic policy uncertainty (EPU) and international stock markets (US, EU, UK, Japan, China, and Vietnam) under bearish, normal, and bullish market conditions. We employ a cross-quantilogram and quantile connectedness approach to investigate the contemporaneous linkages and asymmetries among stock markets under various financial market uncertainty. Using the cross-quantilogram approach, we find strong cross-quantilogram dependencies from the US stock market to other markets, even after controlling for the uncertainties. We find greater spillovers under volatile market conditions—bearish and bullish—than under stable market conditions using the quantile connectedness approach. The financial volatility or uncertainty indices are net transmitter (receiver) of spillover in the stock markets, especially in the bearish and tranquil (bullish) market status. Furthermore, all markets and the uncertainty indices except the US, Europe, and the UK are net receivers of spillovers in the lower quantile, while VIX uncertainty index shifts to being a net transmitter of spillovers in the lower and median quantiles. In the upper quantile, Japanese stock market and the uncertainty indices are net receivers of spillovers. VIX is strongly linked to the US (Chinese) market in tranquil (bullish) market conditions. In addition, the maximum amount of spillovers was attained during the beginning of 2020, coinciding with the onset of the COVID-19 pandemic's first wave.
KW - Quantiles
KW - Spillovers
KW - Stock markets
KW - Uncertainty indices
UR - http://www.scopus.com/inward/record.url?scp=85166655792&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85166655792&partnerID=8YFLogxK
U2 - 10.1016/j.najef.2023.101970
DO - 10.1016/j.najef.2023.101970
M3 - Article
AN - SCOPUS:85166655792
SN - 1062-9408
VL - 68
JO - North American Journal of Economics and Finance
JF - North American Journal of Economics and Finance
M1 - 101970
ER -