How do uncertainties affect the connectedness of global financial markets? Changes during the Russia-Ukraine conflict

We utilize the spectral decomposition of TVP-VAR connectedness to examine the dynamics of connectedness among six global financial markets. Additionally, we employ dynamic model averaging with retrospective analysis to ascertain the impact of uncertainties on the connectedness network. The findings reveal a shift from a declining trend in both total and directional connectedness to an ascending trend during the Russia-Ukraine conflict. The US dollar has the largest outward and inward spillovers in the short-term, but G7 MSCI and EFM MSCI are the largest outward and inward spillovers in the medium- and long-term, respectively. Among the five uncertainties under study, the financial stress index and VIX consistently hold significant influence throughout the sample period. Meanwhile, geopolitical risk and Twitter-based economic uncertainty demonstrate significance during the conflict period. Nonetheless, the impacts of these uncertainties diverge. The financial stress index and Twitter-based economic uncertainty exhibit positive effects, whereas VIX and geopolitical risk tend to weaken connectedness. Our findings underscore the need for investors to remain cautious of shifts in market connectedness patterns as they manage their assets.