Dynamic volatility spillovers between industries in the US stock market: Evidence from the COVID-19 pandemic and Black Monday

• Published in: The North American journal of economics and finance Vol. 59; p. 101614
• Main Author: Choi, Sun-Yong
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01-01-2022
• Subjects: Black Monday; COVID-19 pandemic; S&P 500 index; Volatility spillovers; S&P 500 index; Q43; COVID-19 pandemic; C58; G01; G12; Black Monday; Volatility spillovers
• ISSN: 1062-9408; 1879-0860
• DOI: 10.1016/j.najef.2021.101614

We examine the volatility spillovers among various industries during the COVID-19 pandemic period. We measure volatility spillovers by defining the volatility of each sector in the S&P 500 index and implement a static and rolling-window analysis following the Diebold and Yilmaz (2012) approach. We find that the pandemic enhanced volatility spillovers, which reveals the financial contagion effects on the US stock market. Second, there were sudden, large changes in the dynamic volatility spillovers on Black Monday (March 9, 2020), much of it due to the energy sector shock. These findings have important implications for portfolio managers and policymakers.
•We examine the volatility spillovers for various industries in the COVID-19 pandemic.•We implement a static and rolling-window analysis.•We find that the pandemic enhanced volatility spillovers.•We also find that large changes in the dynamic volatility spillovers on Black Monday.•The energy sector shock is the main cause of Black Monday.