Volatility spillovers among major tourism stock indices during Covid-19 pandemic

Abstract

This paper examines the dynamics of volatility spillovers among five major tourism stock indices during the Covid-19 period. Our paper enriches the current literature as it is the first paper to investigate the volatility spillovers among major global tourism stock indices by adopting Diebold and Yilmaz (2012. Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57-66. ), and Barunik and Krehlik (2018. Measuring the Frequency Dynamics of Financial Connectedness and Systemic Risk. Journal of Financial Econometrics, 16(2), 271-296.) time and frequency domain methods. Results suggest that total spillovers of the tourism stock indices rose significantly during the pandemic. Turkey and Italy are net volatility spillover transmitters, and others are net volatility spillover receivers. Findings of this study also indicates that the effect of volatility transmission among tourism stock markets is temporary (short-lasting). The results suggest that short-term investors and portfolio managers should avoid investing in the tourism indices in the short term.