Adekoya’s research significantly contributes to understanding financial risk spillovers

Oluwasegun Adekoya’s groundbreaking contributions to the understanding of risk transmissions across financial markets have significantly advanced the field.

His novel research has provided invaluable insights into the drivers and mechanisms behind volatility risk spillovers on both global and country-specific levels. Many economists acknowledge that the 2007/2008 global financial crisis exposed a critical gap in finance literature: how to accurately measure volatility risk spillovers across different financial markets.

Adekoya’s research addresses this gap, with his findings offering crucial policy implications for both investors and policymakers. Investors benefit by learning how to manage portfolios and diversify risks more effectively, while policymakers, including central banks, are better equipped to mitigate the influence of economic policy uncertainties.

His research stands out in several key areas. Notably, he argues that the traditional equity market is no longer independent of the commodity and green markets.

“The increasing financialisation of global commodity markets and the financing of green projects, such as through issuing green bonds for environmental sustainability, have created opportunities for ‘vertical’ transmission of risks across conventional stock markets and unconventional markets. Commodities (e.g., crude oil, gold) and green assets are now tradable, allowing investors to switch between them for safety,” he explained.

Another innovative aspect of his work is his demonstration that not all crises trigger the same type of financial risk. His studies reveal that different crises—whether financial (e.g., the 2008 financial crisis), health-related (e.g., the COVID-19 pandemic), or geopolitical (e.g., the Russia-Ukraine war)—have unequal impacts on volatility risks and their persistence. This novel finding underscores the importance of treating each crisis based on its unique effects.

“What they affect, how they affect, and when they affect are crucial,” he emphasised.

In addition to his empirical contributions, Adekoya has significantly advanced the methodological toolkit for analyzing risk transmissions. Along with his co-authors, he introduced an asymmetric version of the Time-varying Parameter Vector Autoregressive (TVP-VAR) model.

“While the original TVP-VAR model is unique, it was not designed to capture spillover asymmetries, which are a hallmark of modern complex market dynamics.

“Our asymmetric TVP-VAR technique identifies three distinct forms of spillovers that can be integrated into multivariate portfolio frameworks for more robust analysis. The R package is available on CRAN,” he added.

The fact that this R package has been included in the Comprehensive R Archive Network (CRAN) and that the technique is increasingly employed by other researchers in the field speaks to the novelty and utility of this approach. Adekoya’s research will undoubtedly continue to guide investment decisions and economic policymaking. His work will also remain a critical reference point for future researchers in the field.

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