International Journal of

Business & Management Studies

ISSN 2694-1430 (Print), ISSN 2694-1449 (Online)
Study on higher-moment risk spillover effects between stock and exchange rate markets: An empirical analysis based on China’s Mainland and Hong Kong markets

Abstract


In the context of the deepening opening-up of China’s financial markets to the outside world, this paper combines the GARCHSK higher-moment volatility model with the spillover index method to quantitatively analyze the higher-moment risk spillover effects among China’s mainland stock market, Hong Kong stock market, onshore RMB market, and offshore RMB market. The empirical results show that: (1) Besides the volatility spillover effects, the skewness and kurtosis spillover effects among the four markets are also significant; (2) The offshore RMB market mainly acts as the risk spillover net transmitter under all moments; while the onshore RMB market acts as the skewness and kurtosis spillovers net transmitters, and the volatility spillover net receiver; the mainland stock market and Hong Kong stock market act as the volatility spillover net transmitter and the kurtosis spillover net receiver respectively; (3) The risk spillover effects between the markets of the same type, i.e., the mainland and Hong Kong stock markets, the offshore and onshore RMB markets, demonstrate the characteristic of risk spillover matching; (4) From a spatial perspective, the net pairwise volatility spillover network forms clusters of the markets with the same type, while the structure of net skewness and kurtosis spillover network is more stable. The research findings are of reference significance for the regulatory authorities to comprehensively and systematically understand the risk contagion characteristics among financial markets across regions.