Multidimensional market connectedness amid escalating trade tensions: largest US and Chinese Tech equities, DeFi, and ESG

Abstract This study investigates connectedness among the largest US and Chinese technology equities, Environmental, Social, and Governance (ESG) investments, and decentralized finance (DeFi) markets. The study uses daily prices from July 02, 2021, to April 22, 2025, and employs the Diebold–Yilmaz spillover framework. Its novelty lies in its comprehensive analysis of market integration across five distinct connectedness dimensions: return co-movement, sophisticated volatility spillovers, basic volatility transmission, asymmetric risk contagion, and tail risk connectedness, and in its inclusion of both normal market conditions and the 2025 escalation of US–China trade tensions. Results reveal that US technology stock-only, Chinese technology stock-only, and US tech stock-ESG market spillovers are generally substantial, while US–Chinese tech stock, US tech stock-DeFi market, Chinese tech stock-ESG market, Chinese tech stock-DeFi market, and ESG-DeFi market transmissions are relatively weak. On average, return co-movement and sophisticated volatility spillovers (tail risk spillovers and basic volatility transmission) demonstrate the highest (lowest) connectedness. Across the connectedness dimensions, US technology stocks and the ESG market (Chinese tech equities and the DeFi market) generally acted as net transmitters (receivers). Additionally, the 2025 escalation of US–China trade tensions dramatically amplified spillovers across all dimensions. Given these findings, portfolio managers and institutional investors should implement multidimensional risk assessment frameworks, central banks and monetary policy authorities should establish technology-sector-focused systemic risk monitoring, and financial regulators should design multidimensional stress-testing protocols that simultaneously simulate geopolitical shock transmission across multiple risk channels. In addition, international trade policymakers should incorporate financial stability costs into trade policy decision-making frameworks. Graphical abstract