Sectoral Connectedness: New Evidence from US Stock Market during COVID-19 Pandemics

16 Pages Posted: 18 Mar 2021 Last revised: 8 Jun 2021

See all articles by Antonio Costa

Antonio Costa

Federal University of Ceara

Paulo Rogério Matos

Federal University of Ceara

Cristiano da Silva

Universidade do Estado do Rio Grande do Norte (UERN)

Date Written: March 15, 2021

Abstract

We examine volatility connectedness of 11 sectoral indices in the US using daily data from January 01, 2013 to December 31, 2020. We employ the connectedness measures of Diebold and Yilmaz (2009, 2012, 2014), unveiling changes in the US sectoral connectedness and stylized facts regarding specific sectors occurred during the COVID-19 pandemic. Among several results, we find extraordinary increase in connectedness during COVID-19, from earlier stages of international spread to the end of July 2020; considerable changes in pairwise relationships, especially among the upper two deciles. However, in a total net connectedness perspective, there is little evidence of structural changes.

Keywords: COVID-19, Sectoral Connectedness, Volatility Spillover, Portfolio allocation

JEL Classification: C3, G1

Suggested Citation

Costa, Antonio and Matos, Paulo Rogério and da Silva, Cristiano, Sectoral Connectedness: New Evidence from US Stock Market during COVID-19 Pandemics (March 15, 2021). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3805087 or http://dx.doi.org/10.2139/ssrn.3805087

Antonio Costa (Contact Author)

Federal University of Ceara ( email )

Rua Papi Júnior 1225 - Rodolfo Teófilo
Fortaleza, Ceara 60431970
Portugal

Paulo Rogério Matos

Federal University of Ceara ( email )

Rua Papi Júnior 1225 - Rodolfo Teófilo
Fortaleza, Ceara 60431970
Portugal

Cristiano Da Silva

Universidade do Estado do Rio Grande do Norte (UERN) ( email )

Assu - State of Rio Grande do Norte
Mossoró, 59610-210
Brazil

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