Non-linear Spillover of External EPU on Macau Gaming Stock Volatility: Micro-foundations using TVP-VAR and ML Attribution

Ji, Zihao and Wang, Guan and Hu, Chenxi and Zhang, Hongru (2026): Non-linear Spillover of External EPU on Macau Gaming Stock Volatility: Micro-foundations using TVP-VAR and ML Attribution.

Abstract

This paper examines the non-linear transmission of external Economic Policy Uncertainty to the volatility of Macau gaming stocks. By combining a TVP-VAR-DY framework with XGBoost and SHAP machine learning attribution, we map the dynamic risk spillovers originating from Mainland China, Hong Kong, and the United States. The empirical results reveal a dual risk topology: regional regulatory shocks manifest as transient, high-intensity pulses (episodic), whereas global systemic uncertainty exhibits a chronic structural persistence that determines the baseline volatility regime. Furthermore, our machine learning analysis reveals that firm resilience depends on specific micro-financial foundations. We find that operating profitability effectively buffers external shocks, whereas financial leverage significantly amplifies them. The study uncovers precise structural tipping points, identifying a sharp increase in risk sensitivity when the debt-to-asset ratio exceeds 80% and determining an optimal liquidity buffer at approximately 15% cash-to-assets. These findings challenge traditional linear assumptions and support the adoption of threshold-based macro-prudential regulations for the sector.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Policy Uncertainty (EPU), Macau Gaming Industry, XGBoost, Non-linear Thresholds, Financial Accelerator
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C45 - Neural Networks and Related Topics; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism

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