Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia.
While spillover across equity markets has been extensively investigated, volatility spillover across sectors has largely been under-examined in the current literature. This paper estimates the sectoral volatility using the ARMA-GARCH model and its spillover across Australian sectors on the VAR frame...
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| Format: | Article |
| Language: | English |
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Public Library of Science (PLoS)
2023-01-01
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| Series: | PLoS ONE |
| Online Access: | https://doi.org/10.1371/journal.pone.0286528 |
| _version_ | 1827931762460721152 |
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| author | Duc Hong Vo |
| author_facet | Duc Hong Vo |
| author_sort | Duc Hong Vo |
| collection | DOAJ |
| description | While spillover across equity markets has been extensively investigated, volatility spillover across sectors has largely been under-examined in the current literature. This paper estimates the sectoral volatility using the ARMA-GARCH model and its spillover across Australian sectors on the VAR framework during the 2010-2021 period. We then identify breakpoints in market volatility during the Covid-19 pandemic using a wavelet methodology. We find that volatility spillover across Australian sectors is very significant at 60 per cent from 2010 to 2019, reaching 90 per cent during the Covid-19 pandemic in 2020. The spillover then reverts to its pre-pandemic level in 2021. Consumer Staples and Industrials are the significant risk transmitters, whereas Financials and Real estates are the most significant risk absorbers. Our findings also indicate that Real Estate, Health Care, and Financials record the most significant increase in volatility of more than 300 per cent. Policy implications regarding risk management across Australian sectors have emerged, particularly during extreme events such as the pandemic. |
| first_indexed | 2024-03-13T06:57:18Z |
| format | Article |
| id | doaj.art-d6771ecf995d47be91b3eab01c5ebf57 |
| institution | Directory Open Access Journal |
| issn | 1932-6203 |
| language | English |
| last_indexed | 2024-03-13T06:57:18Z |
| publishDate | 2023-01-01 |
| publisher | Public Library of Science (PLoS) |
| record_format | Article |
| series | PLoS ONE |
| spelling | doaj.art-d6771ecf995d47be91b3eab01c5ebf572023-06-07T05:32:02ZengPublic Library of Science (PLoS)PLoS ONE1932-62032023-01-01186e028652810.1371/journal.pone.0286528Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia.Duc Hong VoWhile spillover across equity markets has been extensively investigated, volatility spillover across sectors has largely been under-examined in the current literature. This paper estimates the sectoral volatility using the ARMA-GARCH model and its spillover across Australian sectors on the VAR framework during the 2010-2021 period. We then identify breakpoints in market volatility during the Covid-19 pandemic using a wavelet methodology. We find that volatility spillover across Australian sectors is very significant at 60 per cent from 2010 to 2019, reaching 90 per cent during the Covid-19 pandemic in 2020. The spillover then reverts to its pre-pandemic level in 2021. Consumer Staples and Industrials are the significant risk transmitters, whereas Financials and Real estates are the most significant risk absorbers. Our findings also indicate that Real Estate, Health Care, and Financials record the most significant increase in volatility of more than 300 per cent. Policy implications regarding risk management across Australian sectors have emerged, particularly during extreme events such as the pandemic.https://doi.org/10.1371/journal.pone.0286528 |
| spellingShingle | Duc Hong Vo Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia. PLoS ONE |
| title | Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia. |
| title_full | Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia. |
| title_fullStr | Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia. |
| title_full_unstemmed | Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia. |
| title_short | Volatility spillovers across sectors and their magnitude: A sector-based analysis for Australia. |
| title_sort | volatility spillovers across sectors and their magnitude a sector based analysis for australia |
| url | https://doi.org/10.1371/journal.pone.0286528 |
| work_keys_str_mv | AT duchongvo volatilityspilloversacrosssectorsandtheirmagnitudeasectorbasedanalysisforaustralia |