Financial Market Interactions in the QUAD Nations

Abstract

This research investigates the connectedness among the stock markets of the QUAD nations—India, Japan, the United States, and Australia—using the Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) method. The study aims to understand how financial markets in these countries interact and transmit shocks, particularly during periods of global crises. The analysis reveals that the QUAD markets are largely driven by domestic dynamics but exhibit significant spillovers during global events, such as the COVID-19 pandemic, where market connectedness sharply increased. The US stock market emerged as the most influential, particularly in transmitting shocks to Australia. While connectedness declined post-pandemic, a recent rise in interdependence suggests growing global economic and geopolitical influences. The findings have practical implications for South Asian countries such as Malaysia, Vietnam, and Indonesia, highlighting the need for diversified economic strategies. Limitations and future research directions focus on expanding the scope and incorporating macroeconomic factors.