Business-Linkage Volatility Spillover between US Industries

Linh Xuan Diep Nguyen, Simona Mateut and Thanaset Chevapatrakul ()

No 2016/05, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: This paper examines the volatility spillovers between US industries and their dependence on the inter-industry business linkages. Our first-stage multivariate model reveals significant volatility transmission between trading industries. Our second-stage results demonstrate that inter-industry spillovers are influenced by the strength of the trading relationship. When industries are more important to their partners, as measured by the shares of inputs or revenue, they tend to have stronger volatility spillovers toward their partners and are less affected by the volatility of their partners. Qualitatively similar results are obtained regardless of the business-linkages measures used and from samples restricted to closely-linked or to nonfinancial industries. Importantly, business linkages are highly relevant for shock spillovers in bad market conditions. The link between volatility spillovers and the strength of the business relationship is confirmed at portfolio level as well.

Date: 2016
New Economics Papers: this item is included in nep-cse
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Journal Article: Business-linkage volatility spillovers between US industries (2020)
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