Dynamics of Spillover among Sectors of Indian Stock Market before and during Covid-19

Prof. Karamala Padmasree

doi:https://doi.org/10.17492/jpi.mudra.v10i2.1022306

Submit Manuscript Login / Register Subscribe

Home Page

Editorial Advisory Board

Mission, Aims & Scope

Current Issue

Dynamics of Spillover among Sectors of Indian Stock Market before and during Covid-19

Karamala Padmasree

Vol 10 , Issue 2 , July - December 2023 | Pages: 99-117 | Research Paper

Article has been added to the cart.View Cart (0)

https://doi.org/10.17492/jpi.mudra.v10i2.1022306

Published Online: December 10, 2023

Author Details ( * ) denotes Corresponding author

1. * Karamala Padmasree, Professor, Commerce, Central University of Karnataka, Kalaburagi, Kalaburagi, Karnataka, India (kpadmasree@cuk.ac.in)

Analysis of sectoral connectedness within the stock markets is very pertinent not only for better portfolio management but also for policy makers. Identifying the net spillover transmitters and receivers strengthens the confidence of investors to diversify the risk and improves the decision making strategies of policy makers. This is very relevant and pertinent in periods of turbulence. In order to find out the net transmitters and receivers of spillovers, the study carried out by considering the periods of Pre pandemic and during Pandemic periods. Diebold & Yelmaz’s generalized variance decomposition framework based on the VAR and the rolling window approach was also used find out the set of connectedness within the sectors of Indian Stock Market. This will help the investors to carve out their trading strategy and to the policy makers in discovering the sources of risk in the market and to initiate policies to mitigate the systemic risk well prior to any turbulence to struck to the market. The study found that net transmitters from the Indian market are the Financial Service Sector. However, there are some changes found in their intensity of transmission of risk in return and volatility series from the study.

Keywords

Covid-19; During Pandemic; Frequency Connectedness; Indian Stock Market; Pre-pandemic; Spillover

Al-Awadhi, A. M., Alsaifi, K., Al-Awadhi, A., & Alhammadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27. ELSEVIER. Retrieved from https://doi.org/10.1016/j.jbef.2020.100326
Chatziantoniou, I., Gabauer, D., & Marfatia, H. A. (2021). Dynamic connectedness and spillovers across sectors: Evidence from the Indian stock market. Scottish Journal of Political Economy, 69(3), 283–300. Retrieved from https://doi.org/10.1111/sjpe.12291
Chirilă, V. (2022). Connectedness between sectors: The case of the Polish Stock Market before and during COVID-19. Journal of Risk and Financial Management, 15(8). Retrieved from https://doi.org/10.3390/jrfm15080322
Choi, S.-Y. (2022). Volatility spillovers among Northeast Asia and the US: Evidence from the global financial crisis and the COVID-19 pandemic. Economic Analysis and Policy, 73(C), 179–193. Retrieved from https://ideas.repec.org//a/eee/ecanpo/v73y2022icp179-193.html
Dang, T. H.-N., Nguyen, N. T., & Vo, D. H. (2022). Sectoral volatility spillovers and their determinants in Vietnam. Economic Change and Restructuring. Retrieved from https://doi.org/10.1007/s10644-022-09446-9
Diebold, F. X., & Yilmaz, K. (2009). Measuring financial asset return and volatility spillovers, with application to global equity markets. The Economic Journal, 119(534), 158–171. Retrieved from https://doi.org/10.1111/j.1468-0297.2008.02208.x
Diebold, F. X., & Yilmaz, K. (2012). Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57–66. Retrieved from https://doi.org/10.1016/j.ijforecast.2011.02.006
Gulati, R., Charles, V., Hassan, M. K., & Kumar, S. (2023). COVID-19 crisis and the efficiency of Indian banks: Have they weathered the storm? Socio-Economic Planning Sciences, 88, 101661. Retrieved from https://doi.org/10.1016/j.seps.2023.101661
Haldar, A., & Sethi, N. (2020). The effect of country-level factors and government intervention on the incidence of COVID-19. Asian Economics Letters, 1(2). Retrieved from https://doi.org/10.46557/001c.17804
Haldar, A., & Sethi, N. (2021). The news effect of covid-19 on global financial market volatility. Buletin Ekonomi Moneter Dan Perbankan, 24, 33–58. Retrieved from https://doi.org/10.21098/bemp.v24i0.1464
He, F., Liu, Z., & Chen, S. (2019). Industries return and volatility spillover in Chinese Stock Market: An early warning signal of systemic risk. IEEE Access, 7, 9046–9056. Retrieved from https://doi.org/10.1109/access.2018.2888522
Joshi, N.A. (2022). Impact of covid-19 on performance on Indian stock indices: A study for NSE composite and sectoral indices. Copernican Journal of Finance & Accounting, 11(4), 125–146. Retrieved from http://dx.doi.org/10.12775/CJFA.2022.022
Laborda, R., & Olmo, J. (2021). Volatility spillover between economic sectors in financial crisis prediction: Evidence spanning the great financial crisis and Covid-19 pandemic. Research in International Business and Finance (Vol. 57). ELSEVIER. Retrieved from https://doi.org/10.1016/j.ribaf.2021.101402
Lee, K.-J., & Lu, S.-L. (2021). The impact of covid-19 on the stock price of socially responsible enterprises: An empirical study in Taiwan Stock Market. International Journal of Environmental Research and Public Health, 18(4), 1–16. Scopus. Retrieved from https://doi.org/10.3390/ijerph18041398
Liaqat, F., Naeem, M., Khalid, H. M., & Farooq, S. (2021). Assessment of return and volatility spillover across sectors indices: Evidence from Pakistan Stock Exchange. International Journal of Monetary Economics and Finance, 14, 1–20. Retrieved from https://doi.org/10.1504/IJMEF.2021.10040253
Lu, R., Xu, W., Zeng, H., & Zhou, X. (2023). Volatility connectedness among the Indian equity and major commodity markets under the COVID-19 scenario. Economic Analysis and Policy, 78, 1465–1481. Retrieved from https://doi.org/10.1016/j.eap.2023.05.020
Marobhe, M. I., & Kansheba, J. M. P. (2022). Asymmetric volatility spillover between hospitality sub-sectors during COVID-19: Evidence from the USA. Journal of Hospitality and Tourism Insights. Retrieved from https://doi.org/10.1108/JHTI-08-2022-0322
Mazur, M., Dang, M., & Vega, M. (2021). COVID-19 and the March 2020 stock market crash. Evidence from S&P1500. Finance Research Letters, 38. Scopus. Retrieved from https://doi.org/10.1016/j.frl.2020.101690
Naeem, M. A., Mbarki, I., Alharthi, M., Omri, A., & Shahzad, S. J. H. (2021). Did COVID-19 impact the connectedness between green bonds and other financial markets? Evidence from Time-Frequency Domain with Portfolio Implications. Frontiers in Environmental Science, 9. Retrieved from https://www.frontiersin.org/articles/10.3389/fenvs.2021.657533
Naeem, M. A., Sehrish, S., & Costa, M. D. (2020). COVID-19 pandemic and connectedness across financial markets. Pacific Accounting Review, 33(2), 165–178. Retrieved from https://doi.org/10.1108/PAR-08-2020-0114
Narayan, P. K., Phan, D. H. B., & Liu, G. (2021). COVID-19 lockdowns, stimulus packages, travel bans, and stock returns. Finance Research Letters. Retrieved from https://doi.org/10.1016/j.frl.2020.101732
Olasiuk, H., Kumar, S., Sharma, P., & Ganushchak, T. (2023). Impact of COVID-19 on the Efficiency of Indian IT Companies. Vision: The Journal of Business Perspective. Retrieved from https://doi.org/10.1177/09722629231202082
Chaudhary, R., Bakhshi, P. & Gupta, H. (2020). The performance of the Indian stock market during COVID-19. Investment Management and Financial Innovations, 17(3), 133–147. Retrieved from https://doi.org/:10.21511/imfi.17(3).2020.11
Shahzad, S. J. H., Naeem, M. A., Naeem, M., Peng, Z., & Bouri, E. (2021). Asymmetric volatility spillover among Chinese sectors during COVID-19. International Review of Financial Analysis. Retrieved from https://doi.org/10.1016/j.irfa.2021.101754
Shao, L., Zhang, H., Chang, S., & Wang, Z. (2022). Dynamic connectedness between China’s commodity markets and China’s sectoral stock markets: A multidimensional analysis. International Journal of Finance & Economics. Retrieved from https://doi.org/10.1002/ijfe.2713
Sharma, A. (2022). A comparative analysis of the financialization of commodities during COVID-19 and the global financial crisis using a quantile regression approach. Resources Policy, 78, 102923. Retrieved from https://doi.org/10.1016/j.resourpol.2022.102923
Sharma, P., & Kumar, S. (2023). Zero-COVID policy and stock market sectoral performance in China. Investment Management and Financial Innovations, 116–126. Retrieved from https://doi.org/10.21511/imfi.20(2).2023.10
Shen, Y.-Y., Jiang, Z.-Q., Ma, J.-C., Wang, G.-J., & Zhou, W.-X. (2022). Sector connectedness in the Chinese stock markets. Empirical Economics, 62(2), 825–852. Retrieved from https://ideas.repec.org//a/spr/empeco/v62y2022i2d10.1007_s00181-021-02036-0.html
Song, Y., Bouri, E., Ghosh, S., & Kanjilal, K. (2021). Rare earth and financial markets: Dynamics of return and volatility connectedness around the COVID-19 outbreak. Resources Policy, 74. Retrieved from https://doi.org/10.1016/j.resourpol.2021.102379
Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 36, 101528. Retrieved from https://doi.org/10.1016/j.frl.2020.101528