Volatility spillovers and Asymmetric effects of Chinese A-share markets—Enterprise-Level data Based on high-dimensional social network models

Abstract

ABSTRACT This paper investigates volatility spillovers and their asymmetry in the Chinese A-share market from a firm-level perspective. We calculate the connections of the 5-minute high-frequency realized semivariance volatilities of 81 stocks by using a high-dimensional social network approach. The results show that (i) the volatility spillover effect of corporate-level stocks is significant, with high dynamic total connections, and exhibits sector clustering characteristics. (ii) Both extreme contingencies and economic stimulus can exacerbate the asymmetry of volatility spillovers. During periods with economic stimulus, positive volatility spillovers are much larger than negative ones; at other times, negative spillovers are larger than positive spillovers. (iii) There is a positive linear relationship between the asymmetries in the volatility spillovers received and released by individual stocks. (iv) The financial sector is more sensitive to positive volatility spillovers and dominates the positive volatility spillover system. The telecommunication services and utilities sectors are net emitters of negative volatility spillovers. Our research has substantial ramifications for investors and policy makers with respect to distinguishing different transmission paths of upside and downside risks, conducting better portfolio optimization and establishing risk warning mechanisms.