Spatial spillover around G20 stock markets and impact on the return: a spatial econometrics approach

Abstract

ABSTRACTThis paper investigates the spatial return spillover among G20 financial market and the factors of return. To achieve this object, we define the new gravitational space weight matrix, and construct the spatial autoregressive panel model (SAR). The results show that: (i) the new gravitational space weight matrix is more advantageous in capturing the multidimensional spatial spillover effects among stock markets; (ii) government debt, inflation and macroeconomic performance are significantly positively correlated with stock returns, while the real interest rate and stock market volatility have a negative effect on stock returns.