ABSTRACT This study investigates the impact of China's recent real estate crisis, stemming from Evergrande's struggles, on the return and risk profiles of US‐listed exchange traded funds (ETFs) tracking Chinese stock market indexes. Analysing 26 funds from February 2, 2018 to December 31, 2024, we first employ a VAR model to assess contagion and subsequently use Augmented GARCH and scalar‐BEKK models to quantify the extent of spillover effects. Our findings reveal that while the initial bond payment failure on September 23, 2021, likely affected ETF performance, the official default on December 9, 2021, precipitated a significant and acute decline in returns and an elevation in volatility. Correlation and VAR analyses underscore strong and intensifying linkages between the ETFs and the Chinese stock market, particularly during the crisis period. Furthermore, both the Augmented GARCH and scalar‐BEKK models robustly demonstrate a persistent and magnified transmission of volatility from the Chinese market to the ETF sector. This research offers critical insights for investors managing China‐related ETF volatility and emphasizes the need for policymakers to address systemic risks from the Chinese economy within the global financial system.
Rompotis et al. (Sun,) studied this question.