Quantile liquidity connectedness in emerging stock markets: Investment and policy implications

We study stock market connectedness across quantiles of the liquidity distribution for 24 emerging markets from January 2, 2006, to May 27, 2025. Using the quantile connectedness approach, we show that stock markets are strongly interconnected, mainly at extreme quantiles. This interdependence is dynamic and intensifies during periods of crisis across all quantiles. We identify the stock markets that provide the best diversification opportunities in each quantile due to their lower interconnection, as well as those that are more interconnected and facilitate shock propagation. These results provide useful recommendations for investment decision-making and financial regulation.