Volatility spillovers and hedging effectiveness between health and tourism stocks: Empirical evidence from the US

Afees Salisu, Lateef Akanni and Xuan Vinh Vo

International Review of Economics & Finance, 2021, vol. 74, issue C, 150-159

Abstract: The study evaluates the return and volatility transmission between the health and tourism stocks. The outbreak of covid-19 pandemic brought about an unprecedented crisis in the global health and financial market with the tourism sector being among the largest casualty as it experienced an almost total collapse as a result of economic lockdowns and movement restrictions, while the health sector witnessed considerable boom. We employ the VARMA–CCC-AGARCH model, based on the preliminary tests, on daily data collected for health and tourism stocks between January 02, 2018 and July 09, 2020. The empirical estimation is also partitioned into full, pre-covid-19 and covid-19 periods to elicit the impact of the pandemic outbreak. We further examine the optimal weights of holding health and tourism stocks and compute the hedging ratios in the presence of health risks. Our empirical findings show evidence of significant negative bidirectional return spillover between the health and tourism sectors particularly during the covid-19 period. In addition, the hedge ratios further confirm the hedging effectiveness of health stocks for risks associated with tourism stocks particularly during the pandemic period. Essentially, our results show that a diversified asset portfolio that includes health together with tourism stocks may improve risk-adjusted return performance for investors especially during pandemics.

Keywords: Volatility spillovers; Hedging effectiveness; Health stocks; Tourism stocks (search for similar items in EconPapers)
JEL-codes: C58 G11 Z31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056021000307
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:reveco:v:74:y:2021:i:c:p:150-159

DOI: 10.1016/j.iref.2021.02.005

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().