Multiscale financial risk contagion between international stock markets: Evidence from EMD-Copula-CoVaR analysis

Considering the frequency domain and nonlinear characteristics of financial risks, we measure the multiscale financial risk contagion by constructing EMD-Copula-CoVaR models. Using a sample composed of nine international stock markets from January 4, 1999, to May 13, 2021, the empirical study reveals that: (1) EMD-Copula-CoVaR models can effectively measure the multiscale financial risk contagion, and the financial risk contagion is significant at all time scales; (2) The high-frequency component is the major contributor of financial risk contagion; meanwhile, the low-frequency component is the smallest among all time scale components; (3) The risk export of the US financial market to other markets, except the UK under the original and mediumfrequency component, is higher than that it receives; and (4) Even though the magnitude of overall financial risk contagion is similar for the COVID-19 pandemic, Subprime Crises, 9/11 terrorist attack and other crises, the relative importance of different frequency components is heterogeneous. Therefore, the countermeasures of risk contagion should be designed according to its multiscale characteristics.