Multiscale Tail Risk Connectedness of Global Stock Markets: A LASSO-Based Network Topology Approach

Figure 3

VaRs of SPX.US at multiple frequencies. Notes: (1) the 5% VaR calculated under the confidence level of 95% is shown. (2) The shaded areas mark the major risk events between June, 2006, and March, 2021. The marked events are listed as follows: Event 1: Lehman bankruptcy (September15, 2008); Event 2: S&P downgraded Greece’s long-term sovereign credit rating from A- to BBB+ (December 16, 2009); Event 3: the US stock market flash crash (May 6, 2010); Event 4: Japan was hit by a 9.0 magnitude earthquake, followed by a tsunami (March 11, 2011); Event 5: the United States lost its AAA long-term sovereign credit rating and lowered it by one notch to AA+ (August 5, 2011); Event 6: APEC leaders issued a statement that the global economy is facing significant downside risks, partly affected by the European debt crisis (November 14, 2011); Event 7: quantitative easing has officially ended in the US (October 29, 2014); Event 8: major stock market disaster (August 24, 2015); Event 9: the first trading day after the “circuit breaker” mechanism was introduced (January 4, 2016); Event 10: UK voted in a referendum to exit from the European Union (June 23, 2016); Event 11: US stocks tumbled, with the Dow recording its biggest intraday point drop ever, and currencies tumbled (February 5, 2018); Event 12: WHO has classified the COVID-19 outbreak as a “public health emergency of international concern” (January 31, 2020). (3) VaRs of other indexes are available.