IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v15y2022i10p480-d948531.html
   My bibliography  Save this article

Volatility Spillover among Japanese Sectors in Response to COVID-19

Author

Listed:
  • Hideto Shigemoto

    (Graduate School of Science and Technology, Kwansei Gakuin University, 2-1 Gakuen, Sanda 669-1337, Hyogo, Japan)

  • Takayuki Morimoto

    (School of Science, Kwansei Gakuin University, 2-1 Gakuen, Sanda 669-1337, Hyogo, Japan)

Abstract

This study clarifies how risks spread across economic sectors and indicates the sectors that are the most affected to help investors with asset allocation and to support them in risk management. Although the Japanese stock market is one of the relatively large global stock markets, no studies have explored volatility spillovers among its sectors. Using the forecast error variance decomposition of the vector autoregressive model, this study examines the volatility spillovers among sectors classified on the Tokyo Stock Exchange. Our findings show that the pattern of volatility spillovers across sectors in the Japanese stock market differs between a few years preceding the coronavirus disease 2019 (pre-COVID-19), from 2014 to 2019, and during the COVID-19 period, in 2020. Although the energy resources and bank sectors are risk receivers in the pre-COVID-19 period, these sectors are risk transmitters during the COVID-19 period. We also find that volatility spillovers in the Japanese stock market are mainly driven by negative realized semivariance. These results are useful for asset allocation and risk management.

Suggested Citation

  • Hideto Shigemoto & Takayuki Morimoto, 2022. "Volatility Spillover among Japanese Sectors in Response to COVID-19," JRFM, MDPI, vol. 15(10), pages 1-21, October.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:10:p:480-:d:948531
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/15/10/480/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/15/10/480/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ahmad, Wasim & Hernandez, Jose Arreola & Saini, Seema & Mishra, Ritesh Kumar, 2021. "The US equity sectors, implied volatilities, and COVID-19: What does the spillover analysis reveal?," Resources Policy, Elsevier, vol. 72(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naeem, Muhammad Abubakr & Karim, Sitara & Uddin, Gazi Salah & Junttila, Juha, 2022. "Small fish in big ponds: Connections of green finance assets to commodity and sectoral stock markets," International Review of Financial Analysis, Elsevier, vol. 83(C).
    2. Thobekile Qabhobho & Anokye M. Adam & Anthony Adu-Asare Idun & Emmanuel Asafo-Adjei & Ebenezer Boateng, 2023. "Exploring the Time-varying Connectedness and Contagion Effects among Exchange Rates of BRICS, Energy Commodities, and Volatilities," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 272-283, March.
    3. Naeem, Muhammad Abubakr & Karim, Sitara & Tiwari, Aviral Kumar, 2022. "Quantifying systemic risk in US industries using neural network quantile regression," Research in International Business and Finance, Elsevier, vol. 61(C).
    4. Ahmad, Wasim & Kutan, Ali M. & Chahal, Rishman Jot Kaur & Kattumuri, Ruth, 2021. "COVID-19 Pandemic and firm-level dynamics in the USA, UK, Europe, and Japan," International Review of Financial Analysis, Elsevier, vol. 78(C).
    5. Sheng, Lin Wen & Uddin, Gazi Salah & Sen, Ding & Hao, Zhu Shi, 2024. "The asymmetric volatility spillover across Shanghai, Hong Kong and the U.S. stock markets: A regime weighted measure and its forecast inference," International Review of Financial Analysis, Elsevier, vol. 91(C).
    6. Nobanee, Haitham & Azmi, Wajahat & Chakraborty, Dipanwita & Hamill, Philip Anthony & Nghiem, Xuan-Hoa, 2023. "Can we breathe a sigh of relief now? The impact of First Republic Bank takeover by JP Morgan on the US equity markets," Finance Research Letters, Elsevier, vol. 58(PB).
    7. Gongyue Jiang & Gaoxiu Qiao & Lu Wang & Feng Ma, 2024. "Hybrid forecasting of crude oil volatility index: The cross‐market effects of stock market jumps," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(6), pages 2378-2398, September.
    8. Yousaf, Imran & Arfaoui, Nadia & Gubareva, Mariya, 2024. "Spillovers and hedging effectiveness between oil and US equity sectors: Evidence from the COVID pre- and post-vaccination phases," Research in International Business and Finance, Elsevier, vol. 69(C).
    9. Arfaoui, Nadia & Yousaf, Imran & Jareño, Francisco, 2023. "Return and volatility connectedness between gold and energy markets: Evidence from the pre- and post-COVID vaccination phases," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 617-634.
    10. Mensi, Walid & Yousaf, Imran & Vo, Xuan Vinh & Kang, Sang Hoon, 2022. "Asymmetric spillover and network connectedness between gold, BRENT oil and EU subsector markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    11. Asafo-Adjei, Emmanuel & Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Lee, Chi-Chuan, 2024. "Risk synchronization in Australia stock market: A sector analysis," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 582-610.
    12. Okhrin, Yarema & Uddin, Gazi Salah & Yahya, Muhammad, 2023. "Nonlinear and asymmetric interconnectedness of crude oil with financial and commodity markets," Energy Economics, Elsevier, vol. 125(C).
    13. Qiao, Gaoxiu & Ma, Xuekun & Jiang, Gongyue & Wang, Lu, 2024. "Crude oil volatility index forecasting: New evidence based on positive and negative jumps from Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 415-437.
    14. Mensi, Walid & Vo, Xuan Vinh & Ko, Hee-Un & Kang, Sang Hoon, 2023. "Frequency spillovers between green bonds, global factors and stock market before and during COVID-19 crisis," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 558-580.
    15. Ahmad, Wasim & Kutan, Ali M. & Gupta, Smarth, 2021. "Black swan events and COVID-19 outbreak: Sector level evidence from the US, UK, and European stock markets," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 546-557.
    16. Ahmad, Wasim & Chahal, Rishman Jot Kaur & Rais, Shirin, 2022. "Understanding the impact of the coronavirus outbreak on the economic integration of ASEAN countries," LSE Research Online Documents on Economics 124068, London School of Economics and Political Science, LSE Library.
    17. Tunc, Ahmet, 2024. "ETFs amidst the COVID-induced technological transformation: Sectoral insights from time-varying dynamics of tail risk transmissions," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    18. Walid Mensi & Salem Adel Ziadat & Xuan Vinh Vo & Sang Hoon Kang, 2024. "Spillovers and Portfolio Management Between the Uncertainty Indices of Oil and Gold and G7 Stock Markets," Computational Economics, Springer;Society for Computational Economics, vol. 64(4), pages 2233-2262, October.
    19. Choi, Sun-Yong, 2022. "Dynamic volatility spillovers between industries in the US stock market: Evidence from the COVID-19 pandemic and Black Monday," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:15:y:2022:i:10:p:480-:d:948531. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.