Riding the Waves : A Study of Volatility Spillovers and Inter-Sector Linkages in Us Equity Markets During the COVID-19 Pandemic
In times of crisis, stock markets experience a significant increase in returns volatility, which leads to spillovers across equity sectors. The purpose of this study is to investigate the asymmetric spillovers across ten U.S equity sectors, representing different industries. Daily prices of sector indices were collected from 02-January-2018 to 22-October-2021 for the analysis. In addition, the study applied Diebold and Yilmaz's (2012) dynamic spillover methodology, along with the static and rolling windows phenomena, to examine the daily returns spillovers across sector indices. The results indicate that 82% of volatility forecast error variance in U.S sector indices is due to the spillover effect. Moreover, both industrials and financials exhibit the highest gross spillovers to other sectors, while they also receive the highest spillovers from other sectors. Furthermore, the oil & gas sector and utilities sector receive the highest net returns spillovers. These empirical findings provide crucial information regarding the interdependence of U.S sector indices during the COVID-19 pandemic, which is relevant for investors and practitioners
Year of publication: |
[2023]
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Authors: | Kayani, Umar Nawaz ; Aysan, Ahmet Faruk ; Khan, Mrestyal ; Khan, Maaz |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
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