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Business-linkage volatility spillovers between US industries

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  • Nguyen, Linh Xuan Diep
  • Mateut, Simona
  • Chevapatrakul, Thanaset

Abstract

We examine the volatility transmission across industries and its dependence on the inter-industry business linkages. Our analysis reveals significant cross-industry volatility spillovers, which are clearly associated with the strength of the trade relationship between industries. An industry that is more important to its trade partner – as measured by the shares of inputs or revenue – tends to have stronger volatility spillovers toward its partner and it is less affected by the volatility originating from its partner. Importantly, the strength of the business relationship appears highly relevant for shock spillovers in bad market conditions and is also confirmed at the portfolio level.

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  • Nguyen, Linh Xuan Diep & Mateut, Simona & Chevapatrakul, Thanaset, 2020. "Business-linkage volatility spillovers between US industries," Journal of Banking & Finance, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:jbfina:v:111:y:2020:i:c:s0378426619302730
    DOI: 10.1016/j.jbankfin.2019.105699
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    3. Zhu, Bo & Lin, Renda & Deng, Yuanyue & Chen, Pingshe & Chevallier, Julien, 2021. "Intersectoral systemic risk spillovers between energy and agriculture under the financial and COVID-19 crises," Economic Modelling, Elsevier, vol. 105(C).
    4. Liu, Bin & Xiao, Wen & Zhu, Xingting, 2023. "How does inter-industry spillover improve the performance of volatility forecasting?," The North American Journal of Economics and Finance, Elsevier, vol. 65(C).
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    15. Mensi, Walid & Nekhili, Ramzi & Vo, Xuan Vinh & Suleman, Tahir & Kang, Sang Hoon, 2021. "Asymmetric volatility connectedness among U.S. stock sectors," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
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    More about this item

    Keywords

    Asset pricing; Stock markets; Volatility spillovers; Multivariate GARCH; Input – Output linkages;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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