Abstract

This paper investigates to what extent the cross-regional connectedness of the financial market occurs and how it is determined. We adopt Diebold and Yilmaz’s (2014) method to quantify the magnitude and time-varying nature of the connectedness of China’s regional stock price indexes, and the results show a strong and significantly different dynamic connectedness across the regions. Moreover, total connectedness exhibits a dynamic rise in trend in periods of Chinese stock market crashes, trade disputes between China and the United States, and the COVID-19 pandemic. Finally, financial marketization, industrial structure, and government intervention have a significant effect on cross-regional connectedness.

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