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Business-Linkage Volatility Spillover between US Industries

Author

Listed:
  • Linh Xuan Diep Nguyen
  • Simona Mateut
  • Thanaset Chevapatrakul
Abstract
This paper examines the volatility spillovers between US industries and their dependence on the inter-industry business linkages. Our first-stage multivariate model reveals significant volatility transmission between trading industries. Our second-stage results demonstrate that inter-industry spillovers are influenced by the strength of the trading relationship. When industries are more important to their partners, as measured by the shares of inputs or revenue, they tend to have stronger volatility spillovers toward their partners and are less affected by the volatility of their partners. Qualitatively similar results are obtained regardless of the business-linkages measures used and from samples restricted to closely-linked or to nonfinancial industries. Importantly, business linkages are highly relevant for shock spillovers in bad market conditions. The link between volatility spillovers and the strength of the business relationship is confirmed at portfolio level as well.

Suggested Citation

  • Linh Xuan Diep Nguyen & Simona Mateut & Thanaset Chevapatrakul, 2016. "Business-Linkage Volatility Spillover between US Industries," Discussion Papers 2016/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:16/05
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    Cited by:

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    9. 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).
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    15. Xiaoyang Chen & Liguo Zhou & Lin Wang & Yuelong Zheng, 2023. "Risk spillover in China’s real estate industry chain: a DCC-EGARCH-ΔCoVaR model," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-16, December.
    16. 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).
    17. Nekhili, Ramzi & Mensi, Walid & Vo, Xuan Vinh & Kang, Sang Hoon, 2024. "Dynamic spillover and connectedness in higher moments of European stock sector markets," Research in International Business and Finance, Elsevier, vol. 68(C).

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    More about this item

    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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