ORIGINAL RESEARCH article
Front. Phys.
Sec. Social Physics
Volume 13 - 2025 | doi: 10.3389/fphy.2025.1612695
This article is part of the Research TopicFinance and Production Complex SystemsView all 13 articles
Global Geopolitical Risk and Industry Tail Risk in the Chinese Stock Market: A Quantile-on-Quantile Connectedness Approach
Provisionally accepted
- 1Business School, Xiangtan University, Xiangtan, China
- 2School of Mathematical Sciences, National Engineering Laboratory for Big Data Analysis and Application, Peking University, Beijing, China
- 3School of Finance， Yunnan University of Finance And Economics, Kunming, China
- 4Central University of Finance and Economics, Beijing, China
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This study offers an in-depth examination of the quantile-dependent spillover connectedness between global geopolitical risk (GPR) and the tail risk of 18 industries in the Chinese stock market. By using a quantile-on-quantile (QQ) connectedness approach, we investigate how shocks at varying quantiles propagate through the system, thereby uncovering nonlinear dynamics often obscured by traditional mean-variance models. Our findings reveal a distinct “U-shaped” quantile dependence, where extreme quantiles (5% and 95%) exhibit significantly heightened sensitivity to GPR compared to mid-range quantiles. Additionally, a net directional analysis demonstrates that industries with global integration or resource intensity (such as Manufacturing, Mining, and IT) typically serve as net risk receivers during geopolitical turbulence, while certain sectors (notably Finance) may act as net risk senders under specific conditions. A dynamic connectedness analysis further indicates that pivotal geopolitical events, including the 2018 China-U.S. trade war, the COVID-19 pandemic and the 2022 Russia-Ukraine conflict, act as junctures that intensify tail risk transmission. Collectively, these insights emphasize the necessity of quantile-specific risk monitoring and underscore the value of tailored policy interventions to mitigate severe downside risks amid escalating global uncertainties.
Keywords: global geopolitical risk, Tail risk, Quantile-on-Quantile Connectedness, Chinese stock market, Extreme market conditions
Received: 16 Apr 2025; Accepted: 20 May 2025.
Copyright: © 2025 Li, Li, Lai and Li. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
* Correspondence: An Li, Central University of Finance and Economics, Beijing, China
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