The U.S.-China trade conflict impacts on the Chinese and U.S. stock markets: A network-based approach

Abstract

We explore how the U.S.-China trade conflict impacted the Chinese and U.S. stock markets at industry level. Employing a transfer entropy-based technique, the directional non-linear information transmission networks respectively composed of 56 Chinese and 49 U.S. industries are constructed. Then, we identify systemically important industries and transmission paths by implementing the maximum spanning tree approach. Chinese industries exhibit more exposure to the trade tensions when compared to the U.S. counterparts. Results highlight industries of public utilities, industrial equipment manufacturing, and financials playing a dominant role in China’s stock market, while financials, mining and quarrying, retail trade, and manufacturing have central role in the U.S.