Time-varying market reactions to global uncertainties: an analysis of selected stock markets

This study examines time-varying volatility spillovers between global stock markets and major uncertainty indices using Diebold–Yilmaz (DY) and Baruník–Křehlík (BK) connectedness frameworks within a time-varying parameter VAR (TVP-VAR) model. The analysis covers developed markets (US, UK, Germany, Japan, and China), selected African markets (South Africa, Nigeria, Egypt, Tunisia, and Morocco), and key global uncertainty measures, including Geopolitical Risk (GPR), Oil Price Uncertainty (OPU), Economic Policy Uncertainty (EPU), and US–China Trade Tensions (UCT). The findings reveal a hierarchical spillover structure in which developed markets act as dominant net transmitters of volatility, particularly during periods of global stress such as the Global Financial Crisis and the COVID-19 pandemic. China consistently emerges as a net shock absorber, reflecting institutional characteristics that limit outward volatility transmission. Within Africa, South Africa serves as the primary regional transmitter, while Nigeria, Morocco, and Tunisia largely behave as net receivers of shocks. Egypt exhibits modest transmitting capacity consistent with its regional financial integration. Frequency-domain results further indicate that spillovers are concentrated in short- and medium-term horizons, suggesting that volatility transmission is mainly driven by transitory and cyclical shocks rather than persistent structural factors. The results highlight the systemic influence of advanced markets and global uncertainty in shaping financial market dynamics across emerging and frontier economies, with implications for portfolio diversification and financial stability.