Investigating extreme linkage topology in the aerospace and defence industry

Elie Bouri, Barry Quinn, Lisa Sheenan and Yayan Tang

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: This paper analyses return and volatility spillovers among 21 global aerospace and defence (A&D) companies from six countries and three continents using quantile-based models and daily data from August 23, 2010, to July 1, 2022. The results show that both return and volatility spillovers vary over time, and those estimated at normal market conditions, intensify during COVID-19 and Russia–Ukraine war periods. Spillovers of returns estimated at lower and upper quantiles exceed those estimated at the middle quantile. Volatility spillover is extremely high at the upper quantile and exhibits low variability. Chinese defence stocks are segmented from the rest under normal return conditions and a moderate volatility state. In contrast, they are somewhat integrated under extreme return conditions and volatility states. Hence, Chinese defence stocks entail more diversification benefits under normal conditions than in bear or bull markets. Further analysis shows that geopolitical risk consistently plays a significant role in driving both returns and volatility spillovers, especially during the pandemic and war periods, without ignoring the role of macroeconomic and financial variables. These results have implications for investors concerned with stock portfolio management under various return and volatility conditions and for policymakers preoccupied with policy design under unstable periods

Keywords: Aerospace and defence companies; Ukrainian war; Russia; Quantile vector-autoregression (QVAR); COVID-19 (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105752192400098X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s105752192400098x

DOI: 10.1016/j.irfa.2024.103166

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().