RCEP Countries Stock Market Dependence Structure: Constructing Vine-Copula Models Based on Stock Index Data

The signing and implementation of Regional Comprehensive Economic Partnership (RCEP), being one of the largest free trade agreements, had multifaceted impacts on the participating countries. In the realm of regional economic cooperation, it has strengthened cross-border trade and collaboration, fostering increased economic integration and providing nations with more opportunities for economic growth. In the financial sector, financial cooperation has deepened, and the interconnectivity of stock markets among countries has grown. While aiding collective responses to financial crises and challenges, it has also created conditions for the contagion and spread of financial risks. This study utilized time-series data of stock indices from member countries in RCEP to examine the dependence structure. Initially, the study measures the volatility effects of stock markets using Ljung–Box test and then employed an ARMA-EGARCH model to filter time series data of stock indices. And then we obtained the marginal distributions of each variable from the standardized residuals. For joint distribution, We constructed a Vine Copula model to analyze the dependence structure. Comparing the $$\tau$$ of Vine Copula through pre-RCEP and post-RCEP implementation, we found that RCEP enhanced stock market linkages among member countries. Meanwhile, the implementation of the RCEP has altered the dependence structure among the member countries. South Korea has emerged as a central node within this structure, while Japan’s position has been overtaken by Australia. This indicates that RCEP has exerted a notable influence on the financial markets of its member countries, a shift that has been effectively captured by the Vine Copula model.