Spillovers between positively and negatively affected service sectors from the COVID-19 health crisis: Implications for portfolio management

This study empirically investigates volatility spillover, efficient portfolio management, and hedging strategies during the COVID-19 pandemic. It analyzes the connectedness between the negatively affected travel and leisure sector and the positively impacted healthcare, technology, and telecommunications sectors across four regions: Europe, Eastern Europe, Asia-Pacific, and North America. The findings reveal increased return and volatility spillovers during the pandemic, with healthcare, telecommunications, and technology sectors acting as major volatility shock transmitters to the travel and leisure sector. Portfolio analysis suggests including these three sectors to reduce investment risk and protect returns. Hedge ratios varied between crisis and non-crisis periods, indicating adaptable hedging strategies.

Nassar S Al-Nassar, Imran Yousaf, Beljid Makram