Dynamic Interdependence Relationships Among International Stock Markets

Against the backdrop of the gradual waning of the COVID-19 pandemic and a resurgence of global terrorism,China is rising while Europe is experiencing political tensions.The world is presenting a trend towards multipolar development,facilitated by economic globalization that has intensified financial interconnections between nations.Moreover,recurrent major unexpected events are resulting in dramatic fluctuations within financial markets,which hold a contagion effect during uncertain periods,thus negatively impacting the stability and liquidity of these markets.As a barometer of financial economics,the stock market’s trends can reflect the overall situation of current economic development and various stakeholders’ expectations.However,during any crisis event,it is typically the stock market that is hit first and hardest.To further investigate the dynamic dependence structure and strength of international stock markets under the background of major sudden events and to better predict and manage market risks,this study divides experimental data from January2015 to March 2023 into three stages using the COVID-19 pandemic and the UkraineRussia conflict as time nodes.The Vine-Copula model and time-varying SJC-Copula model were used to analyze the transmission path and strength of volatility contagion effects among representative stock indices of the nine global countries.By comparing changes during the three stages,this study examines the impact of major unexpected events on the volatility contagion effects of the stock market.Based on the empirical results,this article concludes:(1)The impact of the COVID-19 pandemic has led to a closer interdependence among stock markets worldwide.As the pandemic’s influence is compounded by the Ukraine-Russia conflict,interdependence between Russian and American stock markets has significantly increased.These results indicate that significant events can increase market risks due to the greater uncertainty,while also lead to a strengthening of volatility spillover effects among major global stock markets.(2)The spillover effects show distinct regional clustering patterns,with European countries displaying the greatest level of interconnectedness between their stock markets,while the interdependence level between the US and Europe is moderate,and that between Japan and China in Asia is weaker.(3)The lower tails dependencies among stock markets are generally higher than those in their upper tails,manifesting that stock markets are more sensitive to negative news,and investor panic is more likely to spread.This paper uses the Copula model to study the changes of interdependence structure and degree among the world’s major stock markets under the background of major emergencies,providing a theoretical basis for the changes in the volatility spillover effects in the stock market and having certain guiding significance for preventing external sudden events and resolving systemic risks.