Abstract
This study integrates spillover dynamics, time-varying connectedness, and network topology to analyse the behaviour of a system comprising 13 global assets, including major stock indices and crude oil, under varying market conditions represented by quantile distributions. Daily data of these assets was reviewed, spanning a 16-year period, from the 1st of July 2008 to the 1st of August 2024. The aim was to assess return spillovers, identify influential markets, and enhance portfolio selection and optimisation. Utilising quantile connectedness analysis, graph theory, and network-based portfolio optimisation, the findings revealed that developed stock markets such as the United States, Germany, and the United Kingdom are dominant transmitters of financial shocks in the system, especially during bear markets. These markets exhibited high Eigenvector centrality, making them critical sources of systemic risk and potential contagion. In contrast, during bull markets, emerging markets such as Mexico and Indonesia became more influential, driven by their role in commodity exports, which significantly shapes global financial dynamics. This indicates that the influence of a market is highly context-dependent, with emerging markets gaining centrality during periods of economic expansion. Additionally, the traditional role of crude oil as a safe-haven asset was brought into question, as it constantly proved to be a net receiver of shocks. The results suggest that crude oil's interconnectedness with other assets, particularly during growth periods, does not translate into defensive characteristics in times of financial stress. The study also demonstrates that portfolios constructed using centrality measures, such as PageRank and Eigenvector to penalise highly central assets, consistently outperform traditional mean-variance portfolios across all market conditions. These findings offer valuable insights for investors and portfolio managers, providing a strategic advantage by focusing on market centrality to optimise risk-adjusted returns and mitigate systemic risks. The research underscores the importance of dynamic, market regime-specific strategies that can adapt to the complexities of global financial markets. The insights gained from this study are essential for financial institutions, policymakers, and global investors aiming to navigate interconnected markets and improve portfolio resilience.