Spillover Connectedness among Global Uncertainties and Sectorial Indices of Pakistan: Evidence from Quantile Connectedness Approach

Shabeer Khan (), Mirzat Ullah (), Mohammad Rahim Shahzad, Uzair Abdullah Khan, Umair Khan, Sayed M. Eldin and Abeer M. Alotaibi
Additional contact information
Shabeer Khan: Department of Islamic Economics and Finance, Faculty of Political Science, Sakarya University, Serdivan 54050, Turkey
Mohammad Rahim Shahzad: Department of Islamic Economics and Finance, Faculty of Political Science, Sakarya University, Serdivan 54050, Turkey
Uzair Abdullah Khan: Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan
Umair Khan: Department of Mathematics and Social Sciences, Sukkur IBA University, Sukkur 65200, Pakistan
Sayed M. Eldin: Center of Research, Faculty of Engineering, Future University in Egypt, New Cairo 11835, Egypt
Abeer M. Alotaibi: Department of Mathematics, Faculty of Science, University of Tabuk, P.O. Box 741, Tabuk 71491, Saudi Arabia

Sustainability, 2022, vol. 14, issue 23, 1-16

Abstract: This study empirically examines the spillovers from global uncertainties to the sectoral indices of the Pakistan stock market (PSX). Furthermore, we select three major sectoral indices, i.e., the energy, financial, and material composite indices. These indices represent a massive capital volume of PSX. We utilize the data from 10 May 2002 to 27 June 2022 to examine the outbreak due to the global financial crisis (GFC) of 2007–2008 and the impact of the world’s great pandemic, of COVID-19. Additionally, we applied a novel econometric estimation approach: quantile connectedness. We found that connectedness is strong in the case of highly positive changes (above the 20% quantile) and highly negative changes (below the 80% quantile). Additionally, the study also found that materials sector is the least connected at level of 1.58%. In contrast, the financial sector was a strong transmitter of spillovers during the entire study period at connectedness of 54.59%. Regarding graphical results, we found that economic policy uncertainty (EPU) and crude oil index (WTI) are net transmitters, especially during the financial crisis and COVID-19, whereas WTI transmitting impact was significantly dominant during GFC 2007–2008. Conversely, the index MSCI remains the recipient of the spillover during the entire study period, where the remitting effect was observed as dominant during the GFC, and COVID-19 outbreak. The energy sector was found to be more recipient during the GFC, with additional turn transmitters of the shocks after the COVID-19 pandemic. The study recommends that portfolio managers and individual investors consider the materials sector for their investment due to the least connectivity. Similarly, investors need to invest carefully in the financial sector because it is a net transmitter of spillovers to other sectors.

Keywords: PSX sectoral indices; global uncertainty indices; COVID-19; quantile connectedness (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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