Analyzing Structural Breaks and Volatility Spillover due to Infectious Disease in Japan: Using Spillover Networks

10 Pages Posted: 27 Oct 2020

See all articles by Hideto Shigemoto

Hideto Shigemoto

Kwansei Gakuin University - Department of mathematical sciences

Takayuki Morimoto

Kwansei Gakuin University - Department of Mathematical Sciences

Date Written: October 20, 2020

Abstract

In this paper, we investigate structural breaks and volatility spillover effects on the Japanese stock market. To detect structural breaks, we use an iterated cumulative sum of squares (ICSS) algorithm, which can identify multiple change points. To measure the volatility spillover effect, we apply the BEKK-GARCH model. As a result, many sectors have structural breaks that occurred after the novel coronavirus disease 2019 (COVID-19) shock after January 2020. Furthermore, we find that the transportation sector is heavily affected by volatility spillover during years of infectious disease outbreaks and a pure economic shock affects the financial sector.

Keywords: COVID-19, structural breaks, volatility spillover, BEKK-GARCH, spillover networks

JEL Classification: G01, G10

Suggested Citation

Shigemoto, Hideto and Morimoto, Takayuki, Analyzing Structural Breaks and Volatility Spillover due to Infectious Disease in Japan: Using Spillover Networks (October 20, 2020). Available at SSRN: https://ssrn.com/abstract=3715379 or http://dx.doi.org/10.2139/ssrn.3715379

Hideto Shigemoto (Contact Author)

Kwansei Gakuin University - Department of mathematical sciences

Japan

Takayuki Morimoto

Kwansei Gakuin University - Department of Mathematical Sciences ( email )

Japan

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