Spatial linkage of volatility spillovers and its explanation across China’s interregional stock markets: a network approach

ABSTRACT

This article investigates the spatial linkage of volatility spillovers across China’s interregional stock markets. For this purpose, we apply the GARCH–BEKK model to construct volatility network and use the QAP model to analyse the factors affecting volatility spillover linkage between regional stock markets. The results show that the volatility spillover network is highly connected, and each region’s spillover ability is related to its economic development background. Furthermore, the differences in network topological indicators, economic foundations and industrial structures between regions have a significant impact on the spatial linkage of volatility spillovers across China’s interregional stock markets.

KEYWORDS:

• Spatial linkage
• volatility spillover network
• interregional stock markets
• QAP analysis

JEL CLASSIFICATION:

• C51
• C63
• G1
• R51

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This article was supported by grants from the National Natural Science Foundation of China [Grant No. 71571038, 71671030, 71971048].