Dynamic spillovers between global financial stress and uncertainties: Evidence from quantile connectedness

Abstract

This paper investigates the dynamic spillovers between financial stress of global major financial markets and uncertainties. The findings suggest that spillover effects between financial stress and uncertainties vary across quantiles. The spillover effect in extreme markets is significantly higher than that in normal markets. GEPU and IDEMV have the most pronounced spillovers to financial stress, especially in the extreme upper market. Moreover, US is the dominant transmitter of spillover effects to other financial markets, while Japan and India are always net receivers. Rolling-window analysis shows that spillover effects between financial stress and uncertainties are time-varying. Furthermore, the tail spillovers are asymmetric. These findings offer important insights for investors and policymakers to identify potential financial risks and uncertainties in advance and adjust investment and management strategies.