Spillover and connectedness among G7 real estate investment trusts: The effects of investor sentiment and global factors

This paper examines the dynamic spillover interconnectedness of G7 Real Estate Investment Trusts (REITs) markets. We use the spillover index of Diebold and Yilmaz (2012), the time-varying parameters vector-autoregression (TVP-VAR) model, and the quantile regression approach. The result show that REITs network connectedness is dynamic and experiences an abrupt increase in the first wave of COVID-19 outbreak (2020Q1). We also observe a substantial abrupt decrease in connectedness during the success of vaccination programs (end 2021). The connectedness among assets is much stronger during COVID-19 than before. The REITs of Japan and Italy are net receivers of spillover and those of US and UK are net transmitters of spillovers before and during COVID-19. Conversely, the REIT of Canada and Germany (France) switches from net receivers (contributors) of spillovers before the pandemic to net contributors (receivers) during the COVID-19. Finally, we show that News Sentiment index, Geopolitical Risk index, Economic Policy Uncertainty index, US Treasury yield, and Stock Volatility index influence the spillover magnitude across quantiles. © 2023 Elsevier Inc.

Frequency spillovers between green bonds, global factors and stock market before and during COVID-19 crisis.

This paper examines frequency dynamic spillovers in return and volatility and the hedging ability of Green Bonds, gold, silver, oil, the US dollar index, and volatility index against downside US stock prices before and during the COVID-19 pandemic outbreak and for the short and long run. To do so, we use the Diebold and Yilmaz (2014), the TVP-VAR model, and the frequency spillover index by Baruník and Krehlík (2018). We show that the short-term volatility spillovers dominate their long-term counterparts. Green Bond is net transmitters of spillovers in the system at the short term and net receivers at the long term. S&P500 and silver (USDX and oil) are net transmitters (receivers) of short- and long-term spillovers. Gold and VIX are net receivers of short-term spillovers and net transmitters of long-term spillovers. COVID-19 crisis has more effects on the short-term spillover, which reaches its highest level early 2020. COVID-19 and time horizons lead the direction and the magnitude of spillovers. The Quantile-on-Quantile regression analysis shows significant nonlinear relationships between markets under study. More interestingly, we show that green bonds and gold are safe haven assets for US equity investors during COVID-19. On the other hand, a mixed portfolio offers higher diversification benefits. Finally, hedging effectiveness is dependent on COVID-19 and time horizon.

Are sustainable investments interdependent? The international evidence.

The rising concerns about climate change and environmental degradation have urged various stakeholder to focus on sustainable investments that are facing a drag from the Covid-19 pandemic. Since environmental and Covid-19 challenges are global, it is critical to assess the interlinkages of sustainable investments. In this research, we employ the dependence, centrality, and dynamic network approach to examine the interdependence and its determinants across multiple countries between January 2009 and March 2021. The findings indicate France as the lead risk transmitter while Japan and Taiwan show risk reception among international markets. We observe an increase in dependence during economic turmoil notably in Covid-19 episode. The centrality network revealed the prominent significance of sustainable investments in the European countries that can be attributed to their exceptional efforts to combat the climate change. Finally, our results suggest that the volatility in gold prices is the key driver of interdependence of sustainable investments.

Comparing asymmetric price efficiency in regional ESG markets before and during COVID-19.

The ever-emerging environmental, social, and governance (ESG) concerns have received significant attention of policymakers, governments, regulation bodies, and investors. Considering the markets volatilities due to economic and financial uncertainties that can drive the informational price inefficiencies across the markets, this study compares the asymmetric price efficiency of regional ESG markets by using an asymmetric multifractal detrended fluctuation analysis before and during COVID-19 crisis. We then examine whether global factors influence the asymmetric efficiency of regional ESG markets. Our findings reveal that COVID-19 outbreak reduced the efficiency of regional ESG markets, except for Europe, which sustained its efficiency even during the pandemic. Moreover, global factors drive the efficiency of regional ESG markets significantly before and during COVID-19. A major implication of our findings stems from the fact that a contagion reduces the efficiency of the markets while stable economic conditions make those markets informationally efficient.

Determinants of sovereign spreads in Sri Lanka: global factors and country-specific fundamentals

Purpose>The study aims to analyze and compare the influence of country-specific fundamentals and global conditions on sovereign risk of Sri Lanka within the sample period of 2006–2019 while employing Treasury bond rates as proxy for sovereign risk.Design/methodology/approach>The determinant powers of the variables are assessed using the auto regressive distributed lag (ARDL) model to verify both short- and long-run effects on sovereign spreads.Findings>The study finds that Sri Lanka's sovereign spreads are shaped by both country fundamentals and global factors, though local determinants tend to have greater influence when the directions of coefficients are ignored. While the impact of most variables was in line with the researchers' expectations, fiscal deficit was found to have an unconventional negative coefficient which may be explained by investors' optimistic take on Government's involvement in post-war economic development drive during the sample period, enabling Sri Lanka to attract low-cost funding.Research limitations/implications>The study excludes of impact of the ongoing coronavirus disease-2019 ( COVID-19) health crisis which may unduly distort the data. Further, the research does not capture the impact of change in sentiment owing to market information, debt dynamics and policy changes in Sri Lanka.Practical implications>The study reveals that a sound monetary policy directed at preserving both the internal and external value of currency as well as a disciplined fiscal policy are imperative to manage Sri Lanka's sovereign risk, particularly in the face of global uncertainties.Originality/value>The study adds to the literature by investigating the timely importance of a country's internal fundamentals against the global events. Furthermore, the research would complement the scarcity of research regarding that subject focused on the Sri Lankan economy, capturing the rapid variations in the fundamentals that the country has undergone since the end of the civil war while recognizing the growing influence of globalization over the recent years.

Do volatility spillover and hedging among GCC stock markets and global factors vary from normal to turbulent periods? Evidence from the global financial crisis and Covid-19 pandemic crisis

In this paper, we use a bivariate VAR-asymmetric-BEKK-GARCH model to examine returns, asymmetric volatility spillovers, and time-varying correlations among GCC stock markets (Saudi Arabia, UAE, Qatar, Kuwait, Oman, and Bahrain) and five global factors (Islamic stocks, oil, gold, bonds, and real estate) from July 5, 2004, to March 31, 2021. To take into account the effects of the global financial crisis (GFC) and recent COVID-19 pandemic, we divide the sample period into four sub-periods: the full sample without COVID-19, pre-GFC, post-GFC, and the COVID-19 crisis. The empirical results indicate significant return and volatility spillovers between the GCC stock markets and global factors. Moreover, these spillovers between GCC stock markets and global factors increase in both the return and variance during turbulent periods (post-GFC and COVID-19 crisis periods). The time-varying correlations reveal that gold serves as a hedge and safe haven against most of the GCC stock markets in all sample periods, whereas the results vary across markets and sample periods for bonds, oil, Islamic stocks, and real estate assets against the GCC stocks. Our findings provide useful insights for investors and portfolio managers formulating trading strategies, determining asset allocation, and assembling optimal portfolios, since they persistently pursue challenging investment ideas and alternative asset classes, especially at times of financial crisis and global recession.

Impacts of COVID-19 outbreak, macroeconomic and financial stress factors on price spillovers among green bond.

We examine the impacts of the COVID-19 pandemic and global risk factors on the upside and downside price spillovers of MSCI global, building, financial, industrial, and utility green bonds (GBs). Using copulas, CoVaR, and quantile regression approaches, we show symmetric tail dependence between MSCI global GB and both building and utility GBs. Moreover, the upper tail dependence between MSCI global GB and financial GB intensified during COVID-19. We find asymmetric risk spillovers from MSCI global GB to the remaining GBs. Finally, the COVID-19 spread, the Citi macro risk index, and the financial condition index contribute positively to the quantiles' risk spillovers. The spillover index method shows significant dynamic volatility spillovers from global GB to GB sectors that intensify during the pandemic outbreak, except for financial GB. The causality-in-mean and in-variance from COVID-19, Citi macro risk index, and US financial condition index to the downside and upside spillover effects are sensitive to quantiles.