Risk transmission between equity market of China and its trading partners: new evidence from various financial crises

PurposeThe authors examine the volatility connections between the equity markets of China and its trading partners from developed and emerging markets during the various crises episodes (i.e. the Asian Crisis of 1997, the Global Financial Crisis, the Chinese Market Crash of 2015 and the COVID-19 outbreak).Design/methodology/approachThe authors use the GARCH and Wavelet approaches to estimate causalities and connectedness.FindingsAccording to the findings, China and developed equity markets are connected via risk transmission in the long term across various crisis episodes. In contrast, China and emerging equity markets are linked in short and long terms. The authors observe that China leads the stock markets of India, Indonesia and Malaysia at higher frequencies. Even China influences the French, Japanese and American equity markets despite the Chinese crisis. Finally, these causality findings reveal a bi-directional causality among China and its developed trading partners over short- and long-time scales. The connectedness varies across crisis episodes and frequency (short and long run). The study's findings provide helpful information for portfolio hedging, especially during various crises.Originality/valueThe authors examine the volatility connections between the equity markets of China and its trading partners from developed and emerging markets during the various crisis episodes (i.e. the Asian Crisis of 1997, the Global Financial Crisis, the Chinese Market Crash of 2015 and the COVID-19 outbreak). Previously, none of the studies have examined the connectedness between Chinese and its trading partners' equity markets during these all crises.

Risk co-movements and portfolio strategies between energy, gold and BRICS markets

This study applies the parametric and nonparametric approach to examine risk comovement between energy, gold, and BRICS equity markets. Our analysis indicates that the risk comovement between these markets varies across financial crisis events. Crude oil and Russian stocks are substantially connected throughout all sub-sample periods, while gold shows a negative relationship with China and Indian stock markets. Moreover, the short-term risk transmission between the stock markets and commodity markets of China, Brazil, Russia, and India is stronger than the gold and oil markets of South Africa during the financial crises. Chinese stock market returns are higher in connectedness than other emerging markets. Further, crude oil and BRICS indices can be utilized as portfolio diversification assets to offset risks, especially during COVID-19. In addition, China and Russia have greater flexibility regarding hedging efficiency for crude oil in crises. Finally, this study offers policymakers insights into how to improve BRICS business convergence among financial and commodity markets to attract domestic and international investments while avoiding the risk of contagion. © 2023 Elsevier Ltd