Financial contagion analysis on asset return of S&P 500 Index, Shanghai Index, and Hang Seng Index with Jakarta Composite Index for the period 2017 – 2023

https://doi.org/10.35912/jdbm.v1i1.3316
Published: Aug 13, 2025

Abstract:

Purpose: This study investigates financial contagion—the transmission of risk and instability between markets and using the co-volatility contagion test method developed by Fry-McKibbin (2018). This study aims to analyze the volatility linkages among major global stock markets and their impact on Indonesia’s market during economic crises.

Research Methodology: This study examines daily asset returns from January 2017 to December 2023 for the S&P 500 Index (SPX, United States), Shanghai Composite Index (SCI, China), Hang Seng Index (HSI, Hong Kong), and Jakarta Composite Index (JCI, Indonesia). The co-volatility contagion framework measures changes in market correlations between crisis and non-crisis periods.

Results: The findings reveal contagion from SPX, SCI, and HSI to the JCI, with varying co-volatility patterns. The SPX–JCI relationship shows significantly positive co-volatility differences that decline during crises, indicating synchronized but independent movements under global uncertainty. The SCI–JCI differences were significantly negative with low magnitudes, suggesting opposite movement tendencies during crises. HSI–JCI differences were also significantly negative, reflecting reduced connectivity and divergent responses to global risks.

Conclusions: Distinct co-volatility patterns indicate different market sensitivities to global uncertainty, emphasizing the importance of tailored investment and policy strategies.

Limitations: This study focuses on four markets and a defined time span, potentially limiting generalizability. However, it does not account for sector-specific contagion effects.

Contribution: This study provides empirical evidence of volatility transmission mechanisms, offering valuable insights for investors, market participants, and policymakers to enhance risk assessment and investment strategies.

Keywords:
1. Co-Volatility
2. Financial Contagion
3. Return
4. Stock Market
5. Volatility Transmission
Authors:
1 . Ferdy Fardian
Telkom University, Indonesia
2 . Brady Rikumahu
Telkom University, Indonesia
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How to Cite
Fardian, F., & Rikumahu, B. (2025). Financial contagion analysis on asset return of S&P 500 Index, Shanghai Index, and Hang Seng Index with Jakarta Composite Index for the period 2017 – 2023. Journal of Digital Business and Marketing, 1(1), 33–46. https://doi.org/10.35912/jdbm.v1i1.3316
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Issue & Section
Vol. 1 No. 1 (2025): February
Articles
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  1. Abu, S. E. (2024). Audit committee characteristics and firm financial performance of quoted industrial goods firms in Nigeria. International Journal of Financial, Accounting, and Management, 5(4), 445-458. https://doi.org/10.35912/ijfam.v5i4.1718
  2. Akabom, I. A., & Ejabu, F. E. (2018). Effects of thin capitalization and international law on performance of multinational companies in Nigeria. Journal of Accounting and Financial Management ISSN, 4(2), 2018. https://doi.org/10.12816/0048647
  3. Alfredo, H. K. (2023). Calculating Expected Stock Return Using Arbitrage Pricing Theory Model and Analyzing Independent Variables That Affect Stock Expected Return (Analysis Conducted on Kompas100 Stock Issuers For The Period 2020–2022). Journal Research of Social Science, Economics, and Management, 2(9). https://doi.org/10.59141/jrssem.v2i09.432
  4. Ameliah, A. D., & Jatnika, R. (2024). Descriptive Study of College Student’s Career Adaptability with An Internship Experience. Annals of Human Resource Management Research, 4(1), 1-11. https://doi.org/10.35912/ahrmr.v4i1.1806
  5. Ang, A., Hodrick, R. J., Xing, Y., & Zhang, X. (2006). The cross?section of volatility and expected returns. The Journal of finance, 61(1), 259-299. https://doi.org/10.3386/w10852
  6. Asai, M., Gupta, R., & McAleer, M. (2019). The impact of jumps and leverage in forecasting the co-volatility of oil and gold futures. Energies, 12(17), 3379. https://doi.org/10.3390/en12173379
  7. Bekaert, G., Harvey, C. R., & Lundblad, C. (2011). Financial openness and productivity. World Development, 39(1), 1-19. https://doi.org/10.3386/w14843
  8. Cotter, J., Hallam, M., & Yilmaz, K. (2023). Macro-financial spillovers. Journal of International Money and Finance, 133, 102824. https://doi.org/10.1016/j.jimonfin.2023.102824
  9. Diebold, F. X., & Yilmaz, K. (2009). Measuring financial asset return and volatility spillovers, with application to global equity markets. The Economic Journal, 119(534), 158-171. https://doi.org/10.1111/j.1468-0297.2008.02208.x
  10. Forbes, K. J., & Rigobon, R. (2002). No contagion, only interdependence: measuring stock market comovements. The Journal of finance, 57(5), 2223-2261. https://doi.org/10.1111/0022-1082.00494
  11. Fry-McKibbin, R., Hsiao, C., & Martin, V. L. (2018). Measuring financial interdependence in asset returns with an application to euro zone equities. https://doi.org/10.2139/ssrn.3103414
  12. Fry-McKibbin, R., & Hsiao, C. Y.-L. (2018). Extremal dependence tests for contagion. Econometric Reviews, 37(6), 626-649. https://doi.org/10.1080/07474938.2015.1122270
  13. Fu, S., Liu, C., & Wei, X. (2021). Contagion in global stock markets during the COVID?19 crisis. Global Challenges, 5(10), 2000130. https://doi.org/10.1002/gch2.202000130
  14. Hsu, S.-H. (2022). Investigating the co-volatility spillover effects between cryptocurrencies and currencies at different natures of risk events. Journal of Risk and Financial Management, 15(9), 372. https://doi.org/10.3390/jrfm15090372
  15. Kristiyani, S. T., Marlissa, E. R., & Urip, T. P. (2025). The influence of village fund capital participation in Village-Owned Enterprises on the development of Village-Owned Enterprises and the economy of the Wania District community. Journal of Multidisciplinary Academic and Practice Studies, 3(3), 455-469. https://doi.org/10.35912/jomaps.v3i3.3087
  16. Lani, L. R., Hutajulu, H., & Mollet, J. A. (2025). Analysis of human resource development in improving employee performance productivity Regional Financial and Asset Management Agency (BPKAD) Papua Province. Journal of Multidisciplinary Academic and Practice Studies, 3(3), 481-494. https://doi.org/:10.35912/jomaps.v3i3.3114
  17. Li, C., Su, C.-W., Altunta?, M., & Li, X. (2022). COVID-19 and stock market nexus: evidence from Shanghai Stock Exchange. Economic research-Ekonomska istraživanja, 35(1), 2351-2364. https://doi.org/10.1080/1331677x.2021.1941181
  18. Li, Y.-M., & Bai, L.-R. (2021). A Study of the Co-movement and Spillover Effects of Stock Markets Among China and ASEAN-5 Countries. Paper presented at the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021).
  19. Limanseto, H. (2023). Indonesia dan Republik Rakyat Tiongkok Sepakati Kerja Sama di Bidang Ekonomi Digital. Retrieved from https://ekon.go.id/publikasi/detail/5374/indonesia-dan-republik-rakyat-tiongkok-sepakati-kerja-sama-di-bidang-ekonomi-digital
  20. Liu, X., Chen, Z., Chen, Z., & Yao, Y. (2022). The time-varying spillover effect of China’s stock market during the COVID-19 pandemic. Physica A: Statistical Mechanics and Its Applications, 603, 127821. doi:https://doi.org/10.1016/j.physa.2022.127821
  21. Mulyadi, M. S. (2009). Volatility spillover in Indonesia, USA, and Japan capital market.
  22. Nguyen, T. N., Phan, T. K. H., & Nguyen, T. L. (2022). Financial contagion during global financial crisis and covid–19 pandemic: The evidence from DCC–GARCH model. Cogent Economics & Finance, 10(1), 2051824. https://doi.org/10.1080/23322039.2022.2051824
  23. Platonov, K. (2024). Confidence spillovers, financial contagion, and stagnation. Journal of International Money and Finance, 148, 103163. https://doi.org/10.1016/j.jimonfin.2024.103163