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The US equity sectors, implied volatilities, and COVID-19: What does the spillover analysis reveal?

Ahmad, Wasim, Hernandez, Jose Arreola, Saini, Seema and Mishra, Ritesh Kumar (2021) The US equity sectors, implied volatilities, and COVID-19: What does the spillover analysis reveal? Resources Policy, 72. ISSN 0301-4207

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Identification Number: 10.1016/j.resourpol.2021.102102

Abstract

This study examines the spillover role of the implied volatilities of oil, gold, and the stock market with US equity sectors. Using time and frequency-based spillover methods, we find that the market's expectation of oil price volatility (OVX) spillovers less strongly on the US sectoral returns than the market's expectation of US stock market volatility (VIX), which exhibits the dominant spillover role. The market's expectation of gold price volatility (GVZ) has a zero range spillover effect on the sectoral returns and is the most weakly affected by them, suggesting that gold can be used to hedge downside risk in all 10 US equity sectors considered. We also find that the US equity sectors’ spillovers on the VIX and OVX strengthen because of the coronavirus (COVID-19) outbreak.

Item Type: Article
Additional Information: Funding Information: The authors would like to thank the DST-SERB (grant # MTR/2019/001035 ) for their generous financial support. We thank the skillful help of Mr. Danish Ahmad. Publisher Copyright: © 2021
Divisions: India Observatory
Date Deposited: 07 May 2024 14:51
Last Modified: 19 Jul 2024 21:48
URI: http://eprints.lse.ac.uk/id/eprint/122975

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