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COVID-19 social distancing and the US service sector: What do we learn?

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  • Gunay, Samet
  • Kurtulmuş, Bekir Emre

Abstract

This study investigates the impact of COVID-19 social distancing on the US service sector. Results from four industry indexes (hotels, entertainment, restaurants and airlines) indicate that conditional correlations among index pairs exhibited substantial increases. Iterated Cumulative Sums of Squares (ICSS) tests in dynamic conditional correlations show that while the relationship between airlines and entertainment venues is unstable, restaurants and hotels demonstrate stable co-movement. Markov regime-switching regression analysis suggests the pandemic is affecting mainly the entertainment and airline industries, with gradual deterioration in the hotel industry, led by small-market-cap companies. However, we see no evidence of a negative impact on the restaurant industry from the pandemic in our analysis period. This may be related to Maslow's hierarchy of needs. Based on our results, we recommend employment of effective working capital and supply chain management methods in the service sector to streamline the operations of affected companies. In addition, all other sectors should utilize appropriate methods of risk measurement and should take 'Black Swans' into account to incorporate a more accurate probability of unexpected events.

Suggested Citation

  • Gunay, Samet & Kurtulmuş, Bekir Emre, 2021. "COVID-19 social distancing and the US service sector: What do we learn?," Research in International Business and Finance, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:riibaf:v:56:y:2021:i:c:s0275531920309697
    DOI: 10.1016/j.ribaf.2020.101361
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    Cited by:

    1. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    2. Alfredo García & Christopher Hartwell & Martín Andrés Szybisz, 2021. "Defying Gravity: The Economic Effects of Social Distancing," Asociación Argentina de Economía Política: Working Papers 4477, Asociación Argentina de Economía Política.
    3. Samet Gunay & Gokberk Can, 2022. "The source of financial contagion and spillovers: An evaluation of the covid-19 pandemic and the global financial crisis," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-20, January.
    4. Ding, Shusheng & Wang, Anqi & Cui, Tianxiang & Du, Anna Min & Zhou, Xinmiao, 2024. "Commodity market stability and sustainable development: The effect of public health policies," Research in International Business and Finance, Elsevier, vol. 70(PB).
    5. Hu, Yang & Lang, Chunlin & Corbet, Shaen & Wang, Junchuan, 2024. "The impact of COVID-19 on the volatility connectedness of the Chinese tourism sector," Research in International Business and Finance, Elsevier, vol. 68(C).
    6. Patel, Ritesh & Goodell, John W. & Chishti, Muhammad Zubair, 2023. "Assessing connectedness of transportation cryptocurrencies and transportation stocks: Evidence from wavelet quantile correlation," Finance Research Letters, Elsevier, vol. 58(PC).
    7. Al-Nassar, Nassar S. & Yousaf, Imran & Makram, Beljid, 2023. "Spillovers between positively and negatively affected service sectors from the COVID-19 health crisis: Implications for portfolio management," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    8. Nepal, Rabindra & Yadav, Miklesh Prasad & Katoch, Rupinder & Gupta, Himani & Kumar, Atul, 2024. "Co-movement between carbon emissions and forex market: A tale of COVID-19 outbreak and Russia-Ukraine invasion," Resources Policy, Elsevier, vol. 90(C).
    9. M. Yu. Malkina, 2022. "Revenues of Russian Subfederal Budgets under the Pandemic: A Spatial Reversal," Regional Research of Russia, Springer, vol. 12(4), pages 544-555, December.
    10. Merve SEVEN KELEŞ & Mahsum ÖKMEN & Naci İbrahim KELEŞ, 2022. "Effects of Covid-19 Pandemic on Employees in Turkey in Terms of Different Anxiety Levels," Yildiz Social Science Review, Yildiz Technical University, vol. 8(1), pages 30-40.
    11. Li, Yi & Zhang, Wei & Wang, Pengfei, 2021. "Working online or offline: Which is more effective?," Research in International Business and Finance, Elsevier, vol. 58(C).
    12. Cevik, Emrah Ismail & Gunay, Samet & Dibooglu, Sel & Yıldırım, Durmuş Çağrı, 2023. "The impact of expected and unexpected events on Bitcoin price development: Introduction of futures market and COVID-19," Finance Research Letters, Elsevier, vol. 54(C).

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