The US equity sectors, implied volatilities, and COVID-19: What does the spillover analysis reveal?

Wasim Ahmad, Jose Arreola Hernandez, Seema Saini and Ritesh Kumar Mishra

Resources Policy, 2021, vol. 72, issue C

Abstract: This study examines the spillover role of the implied volatilities of oil, gold, and the stock market with US equity sectors. Using time and frequency-based spillover methods, we find that the market’s expectation of oil price volatility (OVX) spillovers less strongly on the US sectoral returns than the market’s expectation of US stock market volatility (VIX), which exhibits the dominant spillover role. The market’s expectation of gold price volatility (GVZ) has a zero range spillover effect on the sectoral returns and is the most weakly affected by them, suggesting that gold can be used to hedge downside risk in all 10 US equity sectors considered. We also find that the US equity sectors’ spillovers on the VIX and OVX strengthen because of the coronavirus (COVID-19) outbreak.

Keywords: Spillovers; US equity Sectors; Oil implied volatility; Gold implied volatility; COVID-19; Frequency connectedness (search for similar items in EconPapers)
JEL-codes: C58 G11 Q41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:72:y:2021:i:c:s0301420721001161

DOI: 10.1016/j.resourpol.2021.102102

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