Correlation of Global Stock Markets from the Perspective of Common Shocks——An Analysis Based on Time-Varying Generalized Dynamic Factor Model
As the global economic situation grows increasingly dire and uncertainty persists,the contagion of financial risks across market has become increasingly significant with the influence of a multitude of interconnected channels.It is ur-gent to examine the correlation between international stock markets and to propose countermeasures for China.Based on the daily data of stock markets of 31 countries and regions,this paper constructs a time-varying generalized dy-namic factor model(tvGDFM)to analyze the long-term correlation,instantaneous correlation,low frequency correlation,high frequency correlation and resonance effects of common shocks in major global stock markets from the perspective of common shocks.The findings of the research are as follows.Firstly,the common factors serve not only as the main conveyors of volatility information in the international stock market but also as the main contributors to resonance effects within it;Secondly,influ-enced by extreme events,the correlation among international stock markets demonstrates significant geographical agglomera-tion effects and territorial characteristics of risk sources,and the contagion of risk between regional stock markets is stronger compared to that between cross-regional stock markets;Thirdly,the correlation within the international stock market has long-term periodicity,and risk contagion has long-term memory.The sensitivity of long-term correlation and instantaneous correlation to global and regional risk events is different;Fourthly,extreme events have intensified homogenization of volatility in the international stock market.Developed economies,characterized by homogeneous correlation,tend to promote pro-cyclicality of volatility,while emerging economies,with heterogeneous correlation,provide some cushioning against exter-nal shocks.In this paper,time-varying correlation,frequency-domain correlation and resonance effect of common shocks are inte-grated into a unified framework,enhancing the analytical perspective in international stock market correlation research.Fur-thermore,it employs phase spectrum analysis technology to provide new thinking on the causes of the same frequency reso-nance effect of international stock market from the perspective of both co-correlation and out-of-correlation.The conclusions of this paper provide a reference for the relevant departments in China to formulate policies addressing the negative impact caused by the strong correlation of the international stock market and to optimize the risk monitoring system in China's finan-cial market.
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