The impact of the Russia–Ukraine conflict (2022) on volatility connectedness between the Egyptian stock market sectors: evidence from the DCC-GARCH-CONNECTEDNESS approach

Hisham Abdeltawab Mahran

Journal of Risk Finance, 2022, vol. 24, issue 1, 105-121

Abstract: Purpose - This study investigates the impact of the Russia–Ukraine war (2022) on the volatility connectedness between Egyptian stock market sectors. Design/methodology/approach - This study employs the newest dynamic conditional correlation (DCC)-generalized autoregressive conditional heteroskedasticity (GARCH)-CONNECTEDNESS approach to examine volatility connectedness in a sample of ten sectors in the Egyptian stock market, namely banks, education, food, healthcare, industry, information technology, real estate, resources, transportation and travel, ranging from February 1, 2019 to May 31, 2022. Findings - The findings show that connectedness among the Egyptian stock market sectors varies depending on the time. The average dynamic connectedness measure among sectors in Egypt is 73.24%. This average was 85.63% during the Russia–Ukraine War (2022). The author also shows that the transportation sector is the most significant net transmitter of volatility in the remaining sectors during the Russia–Ukraine War (2022). Practical implications - This study intends for policymakers to examine the co-movements, market variations and volatility spillover of stock markets, particularly during crises. Furthermore, the results help investors gain insight into diversifying the investors' portfolio assets to optimize profits. Originality/value - To the best of the authors' knowledge, no study has investigated the implications of the war between Russia and Ukraine (2022) on sectoral interconnectedness within the stock markets in any country and discussion and empirical evidence from African countries are lacking. This study fills this gap in the literature. Additionally, the author uses the newest approach, the DCC-GARCH-CONNECTEDNESS approach, to describe the time-varying volatility spillover between economic sectors in Egypt.

Keywords: Stock markets; Volatility connectedness; DCC-GARCH-CONNECTEDNESS approach; The Russia–Ukraine conflict (2022) (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-06-2022-0163

DOI: 10.1108/JRF-06-2022-0163

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