Nexus Between Travel & Leisure Stocks and Uncertainties: An Extreme Risk Spillover Analysis

Dilip Kumar
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Dilip Kumar: Indian Institute of Management Kashipur

American Business Review, 2023, vol. 26, issue 1, 245-268

Abstract: The paper examines the presence of risk spillover to the US travel & leisure industry from the extreme changes in the uncertainties. More specifically, using a time-varying copula based conditional Value-at-Risk (CoVaR) framework, we evaluate the dynamic impact of the uncertainties on the extreme risk of the US travel & leisure industry by taking into consideration the uncertainty in economic policy, equity market conditions, and crude oil prices. The findings indicate a significant dynamic inverse relationship between the returns of travel & leisure industry and changes in uncertainty variables. The results further indicate the stronger sensitivity of the travel & leisure industry toward the uncertainties in financial market and crude oil prices. We find significant evidence of extreme upside and downside risk spillover to the US travel & leisure industry from excessive downward and upward changes in uncertainties respectively. The findings also demonstrate the asymmetric effect of extreme movements in uncertainty factors on the tail risk of the US travel & leisure industry. The findings of the study have ramifications for risk managers, portfolio managers and investors.

Keywords: Extreme Risk Spillover; Copula; Uncertainties; US Travel & Leisure Industry (search for similar items in EconPapers)
JEL-codes: L10 (search for similar items in EconPapers)
Date: 2023
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