Frequency Connectedness and Network Analysis in Equity Markets: Evidence from G-7 Countries

Abstract

In this study, we explore the cross-market volatility transmissions between equity markets in G-7 countries by employing the frequency connectedness method. By implementing this approach, we estimate the dynamic interaction mechanism of systemic risk among strongly interconnected financial markets during financial calm and distress periods. Additionally, we exhibit network topologies of directional spillovers to capture the financial connectedness of G-7 countries. The findings of the study propose that systemic risk contagion between G7 countries intensifies during financial turmoils and underlines the importance of an effective regulatory framework to monitor financial stress.