Heterogeneous Dependence on Global Financial Conditions: Evidence from Emerging Equity Markets

Abstract

This study investigates the transmission of global risk sentiment and U.S. monetary conditions across emerging equity markets. Using MultipleWavelet Coherence (MWC) and Quantile-on-Quantile Regression (QQR) over January 2016–December 2025, the analysis examines time–frequency co-movements and asymmetric linkages between emerging market equity indices, the CBOE Volatility Index (VIX), and the U.S. Treasury yield spread (T10Y3M). The results reveal substantial heterogeneity across markets. China, Russia, Turkey, Mexico, Egypt, and South Africa exhibit stronger long-run synchronization with external financial conditions. Saudi Arabia and Nigeria display more episodic exposure to external shocks. India, Brazil, Indonesia, and the United Arab Emirates represent intermediate cases characterized by recurrent but less persistent linkages. The findings suggest that global risk sentiment and U.S. monetary conditions affect emerging markets differently across investment horizons and periods of financial stress. The robustness analysis indicates that synchronization patterns became fragmented following the tightening cycle and rising geopolitical tensions after 2022, with less uniform spillover transmission across regions. The analysis highlights the importance of nonlinear and time-varying mechanisms in shaping financial spillovers across emerging equity markets.