Tail risk contagion between international financial markets during COVID-19 pandemic

Yanhong Guo, Ping Li, Aihua Li

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

In this paper, we combine the time-varying financial network model and FARM-selection approach to analyze the tail risk contagion between international financial market during the COVID-19 epidemic. Since the tail risk acts as a global transmission channel, we use the sample of 19 international financial markets to explore the contagion of tail risk during the epidemic. We find that the COVID-19 epidemic increases the number of contagion channels in the international financial system. The clustering level of the financial system has a significant growth during the COVID-19 pandemic, and the number of risk drivers is also larger than risk takers. The key financial market of each international financial network is related to the epidemic country. We also consider the tail risk contagion in local financial markets and find that the COVID-19 pandemic has an important influence on the tail risk contagions in local network systems

Original languageEnglish
Article number101649
JournalInternational Review of Financial Analysis
Volume73
DOIs
StatePublished - Jan 2021

Keywords

  • COVID-19 pandemic
  • Dynamic network
  • FARM-selection
  • Tail risk contagion

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