Risk spillovers connectedness between the US Fintech industry VaR, behavioral biases and macroeconomic instability factors: COVID-19 implications

Oumayma Gharbi, Yousra Trichilli and Mouna Boujelbéne

China Finance Review International, 2023, vol. 13, issue 3, 410-443

Abstract: Purpose - The main objective of this paper is to analyze the dynamic volatility spillovers between the investor's behavioral biases, the macroeconomic instability factors and the value at risk of the US Fintech stock market before and during the COVID-19 pandemic. Design/methodology/approach - The authors used the methodologies proposed by Diebold and Yilmaz (2012) and the wavelet approach. Findings - The wavelet coherence results show that during the COVID-19 period, there was a strong co-movement among value at risk and each selected variables in the medium-run and the long-run scales. Diebold and Yilmaz's (2012) method proved that the total connectedness index raised significantly during the COVID-19 period. Moreover, the overconfidence bias and the financial stress index are the net transmitters, while the value at risk and herding behavior variables are the net receivers. Research limitations/implications - This study offers some important implications for investors and policymakers to explain the impact of the COVID-19 pandemic on the risk of Fintech industry. Practical implications - The study findings might be useful for investors to better understand the time–frequency connectedness and the volatility spillover effects in the context of COVID-19 pandemic. Future research may deal with investors' ability of constructing portfolios with another alternative index like cryptocurrencies which seems to be a safer investment. Originality/value - To the best of the authors' knowledge, this is the first study that relies on the continuous wavelet decomposition technique and spillover volatility to examine the connectedness between investor behavioral biases, uncertainty factors, and Value at Risk of US Fintech stock markets, while taking into account the recent COVID-19 pandemic.

Keywords: COVID-19; Instability factors; Investor's behavioral biases; Value-at-Risk (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:cfri-12-2022-0277

DOI: 10.1108/CFRI-12-2022-0277

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