Connectedness Among Sectors of International Stock Markets Before and During COVID-19

COVID-19 has resulted in significant setbacks to economy due to shocks to the consumer and services industries, in terms of a halt of production and operations, difficulty in making payments to employees, and scarcity of employment opportunities, disrupting the entire world economy. This study examines the connectedness among the sectoral indices for India, France, Germany, Russia, Italy, Argentina, Brazil, and Turkey stock markets during the COVID and pre-COVID periods. The sectors under consideration are consumer goods, energy, financials, industrials, real-estate, utilities, basic materials, media and communication, industrial goods, and IT. To ensure empirical robustness, first, we extracted the time-varying volatility series for each variable and used it as an input for applying Diebold and Yilmaz Spillover index. The study shows that during the COVID-19 period, the portfolio diversification provided more economic value compared to pre-COVID-19 period. These findings will help domestic and institutional investors diversify their investments across different sectors of the countries under consideration.