[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/bla/ausecp/v63y2024i1p78-105.html
   My bibliography  Save this article

Impact of global macroeconomic factors on spillovers among Australian sector markets: Fresh findings from a wavelet‐based analysis

Author

Listed:
  • Zhuhua Jiang
  • Rim El Khoury
  • Muneer M. Alshater
  • Seong‐Min Yoon
Abstract
This study investigates the spillover dynamics among 10 Australian sectoral indices and their connectedness to global factors, including the WTI crude oil price, oil market volatility, Australian exchange rate, U.S. stock market volatility index and Infectious Disease Tracker Index. Using data from May 14, 2007 to March 31, 2022, this study applies the time‐varying parameter vector autoregressive model to study their static and dynamic connectedness, wavelet coherence analysis to investigate the time‐frequency co‐movement of global macroeconomic factors with Australian sector stock indices and wavelet decomposition‐based Granger causality. The results show that aggressive stocks (Industrials, Consumer Discretionary and Financials) are net transmitters, while defensive stocks (Health, Information Technology, Communication and Utilities) are net receivers of spillovers. The coronavirus pandemic has increased systemic risk, causing radical changes in net connectedness. Additionally, global macroeconomic factors drive the connectedness of the Australian sectoral indices, with oil and exchange rates moving in phase, and oil volatility, stock volatility and the Infectious Disease Tracker Index moving in antiphase. Global stock and oil market volatility has a significant impact on the Australian sector's returns over short‐, medium‐ and long‐term horizons. This study provides valuable insights to investors and policymakers by carefully examining the relationships between global factors and Australian sectoral indices.

Suggested Citation

  • Zhuhua Jiang & Rim El Khoury & Muneer M. Alshater & Seong‐Min Yoon, 2024. "Impact of global macroeconomic factors on spillovers among Australian sector markets: Fresh findings from a wavelet‐based analysis," Australian Economic Papers, Wiley Blackwell, vol. 63(1), pages 78-105, March.
    • Handle: RePEc:bla:ausecp:v:63:y:2024:i:1:p:78-105
    DOI: 10.1111/1467-8454.12299
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8454.12299
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8454.12299?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mohsen Bahmani‐Oskooee & Yongqing Wang, 2008. "Impact Of Exchange Rate Uncertainty On Commodity Trade Between The Us And Australia," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 235-258, September.
    2. Hui Li & Raul Paraco, 2018. "Impact of Oil Price on Australian Stock Market Returns," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-27, September.
    3. Kaan Celebi & Michaela Hönig, 2019. "The Impact of Macroeconomic Factors on the German Stock Market: Evidence for the Crisis, Pre- and Post-Crisis Periods," IJFS, MDPI, vol. 7(2), pages 1-13, March.
    4. Rodolfo Aquino, 2005. "Exchange rate risk and Philippine stock returns: before and after the Asian financial crisis," Applied Financial Economics, Taylor & Francis Journals, vol. 15(11), pages 765-771.
    5. Diebold, Francis X. & Yılmaz, Kamil, 2014. "On the network topology of variance decompositions: Measuring the connectedness of financial firms," Journal of Econometrics, Elsevier, vol. 182(1), pages 119-134.
    6. Tho D.Q. Nguyen & Jian Wu, 2010. "Spillover impacts of the US macroeconomic news: Australian sectoral perspective," Economics Bulletin, AccessEcon, vol. 30(3), pages 1753-1771.
    7. Knop, Stephen J. & Vespignani, Joaquin L., 2014. "The sectorial impact of commodity price shocks in Australia," Economic Modelling, Elsevier, vol. 42(C), pages 257-271.
    8. Ki-Hong Choi & Ron P. McIver & Salvatore Ferraro & Lei Xu & Sang Hoon Kang, 2021. "Dynamic volatility spillover and network connectedness across ASX sector markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 677-691, October.
    9. Tiwari, Aviral Kumar & Jena, Sangram Keshari & Mitra, Amarnath & Yoon, Seong-Min, 2018. "Impact of oil price risk on sectoral equity markets: Implications on portfolio management," Energy Economics, Elsevier, vol. 72(C), pages 120-134.
    10. Kieran Burgess & Nicholas Rohde, 2013. "Can Exchange Rates Forecast Commodity Prices? Recent Evidence using Australian Data," Economics Bulletin, AccessEcon, vol. 33(1), pages 511-518.
    11. Alexandra Brown & Sigitas Karpavičius, 2017. "The Reaction of the Australian Stock Market to Monetary Policy Announcements from the Reserve Bank of Australia," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 20-41, March.
    12. Aharon, David Y. & Demir, Ender, 2022. "NFTs and asset class spillovers: Lessons from the period around the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 47(PA).
    13. Elie Bouri & Mahamitra Das & Rangan Gupta & David Roubaud, 2018. "Spillovers between Bitcoin and other assets during bear and bull markets," Applied Economics, Taylor & Francis Journals, vol. 50(55), pages 5935-5949, November.
    14. Ahmed BenSaïda & Jose Arreola Hernandez & Houda Litimi & Seong-Min Yoon, 2022. "The influence of oil, gold and stock market index on US equity sectors," Applied Economics, Taylor & Francis Journals, vol. 54(6), pages 719-732, February.
    15. Walid Mensi & Shawkat Hammoudeh & Ahmet Sensoy & Seong-Min Yoon, 2017. "Analysing dynamic linkages and hedging strategies between Islamic and conventional sector equity indexes," Applied Economics, Taylor & Francis Journals, vol. 49(25), pages 2456-2479, May.
    16. Tiwari, Aviral Kumar & Cunado, Juncal & Gupta, Rangan & Wohar, Mark E., 2018. "Volatility spillovers across global asset classes: Evidence from time and frequency domains," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 194-202.
    17. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    18. Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2009. "International Stock Return Comovements," Journal of Finance, American Finance Association, vol. 64(6), pages 2591-2626, December.
    19. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    20. Hernandez, Jose Arreola & Shahzad, Syed Jawad Hussain & Sadorsky, Perry & Uddin, Gazi Salah & Bouri, Elie & Kang, Sang Hoon, 2022. "Regime specific spillovers across US sectors and the role of oil price volatility," Energy Economics, Elsevier, vol. 107(C).
    21. Nicolaas Groenewold & James E.H. Paterson, 2013. "Stock Prices and Exchange Rates in Australia: Are Commodity Prices the Missing Link?," Australian Economic Papers, Wiley Blackwell, vol. 52(3-4), pages 159-170, December.
    22. Ranajit Kumar Bairagi, 2022. "Dynamic Impacts of Economic Policy Uncertainty on Australian Stock Market: An Intercontinental Evidence," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 21(1), pages 64-91, March.
    23. Maghyereh, Aktham & Awartani, Basel & Abdoh, Hussein, 2020. "The effects of investor emotions sentiments on crude oil returns: A time and frequency dynamics analysis," International Economics, Elsevier, vol. 162(C), pages 110-124.
    24. Mensi, Walid & Lee, Yun-Jung & Vo, Xuan Vinh & Yoon, Seong-Min, 2021. "Quantile connectedness among gold, gold mining, silver, oil and energy sector uncertainty indexes," Resources Policy, Elsevier, vol. 74(C).
    25. Sang Hoon Kang & Seong‐Min Yoon, 2020. "Dynamic correlation and volatility spillovers across Chinese stock and commodity futures markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 261-273, April.
    26. Jose Arreola Hernandez & Sang Hoon Kang & Seong-Min Yoon, 2021. "Spillovers and portfolio optimization of agricultural commodity and global equity markets," Applied Economics, Taylor & Francis Journals, vol. 53(12), pages 1326-1341, March.
    27. Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Karikari, Nana Kwasi & Hammoudeh, Shawkat, 2022. "Time-varying dependence dynamics between international commodity prices and Australian industry stock returns: a Perspective for portfolio diversification," Energy Economics, Elsevier, vol. 108(C).
    28. Iyke, Bernard Njindan & Ho, Sin-Yu, 2021. "Exchange rate exposure in the South African stock market before and during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 43(C).
    29. Ramsey, James B. & Lampart, Camille, 1998. "Decomposition Of Economic Relationships By Timescale Using Wavelets," Macroeconomic Dynamics, Cambridge University Press, vol. 2(1), pages 49-71, March.
    30. Samitas, Aristeidis & Papathanasiou, Spyros & Koutsokostas, Drosos & Kampouris, Elias, 2022. "Are timber and water investments safe-havens? A volatility spillover approach and portfolio hedging strategies for investors," Finance Research Letters, Elsevier, vol. 47(PA).
    31. Yifei Cai, 2018. "Predictive Power of us Monetary Policy Uncertainty Shock on Stock Returns in Australia and New Zealand," Australian Economic Papers, Wiley Blackwell, vol. 57(4), pages 470-488, December.
    32. Dornbusch, Rudiger & Fischer, Stanley, 1980. "Exchange Rates and the Current Account," American Economic Review, American Economic Association, vol. 70(5), pages 960-971, December.
    33. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
    34. Luís Aguiar-Conraria & Maria Joana Soares, 2014. "The Continuous Wavelet Transform: Moving Beyond Uni- And Bivariate Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 344-375, April.
    35. Yoon, Seong-Min & Al Mamun, Md & Uddin, Gazi Salah & Kang, Sang Hoon, 2019. "Network connectedness and net spillover between financial and commodity markets," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 801-818.
    36. Hui-Chu Shu & Jung-Hsien Chang, 2019. "Spillovers of volatility index: evidence from U.S., European, and Asian stock markets," Applied Economics, Taylor & Francis Journals, vol. 51(19), pages 2070-2083, April.
    37. Diebold, Francis X. & Yilmaz, Kamil, 2012. "Better to give than to receive: Predictive directional measurement of volatility spillovers," International Journal of Forecasting, Elsevier, vol. 28(1), pages 57-66.
    38. Cagliesi, Gabriella & Guidi, Francesco, 2021. "A three-tiered nested analytical approach to financial integration: The case of emerging and frontier equity markets," International Review of Financial Analysis, Elsevier, vol. 74(C).
    39. Francisco JAREÑO & Ana ESCRIBANO & Alberto CUENCA, 2019. "Macroeconomic Variables And Stock Markets: An International Study," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 19(1), pages 43-54.
    40. Arouri, Mohamed El Hedi, 2011. "Does crude oil move stock markets in Europe? A sector investigation," Economic Modelling, Elsevier, vol. 28(4), pages 1716-1725, July.
    41. Patricia Fraser & Nicolaas Groenewold, 2000. "The effect of exchange rate shocks on the volatility of Australian sector excess returns: a note," Applied Economics Letters, Taylor & Francis Journals, vol. 7(2), pages 77-81.
    42. Rita D'Ecclesia & Mauro Costantini, 2006. "Comovements and correlations in international stock markets," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 567-582.
    43. Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2020. "Refined Measures of Dynamic Connectedness based on Time-Varying Parameter Vector Autoregressions," JRFM, MDPI, vol. 13(4), pages 1-23, April.
    44. Anil Mishra, 2011. "Australia’s equity home bias and real exchange rate volatility," Review of Quantitative Finance and Accounting, Springer, vol. 37(2), pages 223-244, August.
    45. Munazza Jabeen & Abdul Rashid & Hajra Ihsan, 2022. "The news effects on exchange rate returns and volatility: Evidence from Pakistan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 745-769, January.
    46. Tiwari, Aviral Kumar & Mishra, Bibhuti Ranjan & Solarin, Sakiru Adebola, 2021. "Analysing the spillovers between crude oil prices, stock prices and metal prices: The importance of frequency domain in USA," Energy, Elsevier, vol. 220(C).
    47. Maghyereh, Aktham I. & Awartani, Basel & Bouri, Elie, 2016. "The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes," Energy Economics, Elsevier, vol. 57(C), pages 78-93.
    48. Dinesh Gajurel & Akhila Chawla, 2022. "The oil price crisis and contagion effects on the Canadian economy," Applied Economics, Taylor & Francis Journals, vol. 54(13), pages 1527-1543, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evrim Mandacı, Pınar & Cagli, Efe Çaglar & Taşkın, Dilvin, 2020. "Dynamic connectedness and portfolio strategies: Energy and metal markets," Resources Policy, Elsevier, vol. 68(C).
    2. Mensi, Walid & Ahmadian-Yazdi, Farzaneh & Al-Kharusi, Sami & Roudari, Soheil & Kang, Sang Hoon, 2024. "Extreme Connectedness Across Chinese Stock and Commodity Futures Markets," Research in International Business and Finance, Elsevier, vol. 70(PA).
    3. Muneer Shaik & Mohd Ziaur Rehman, 2023. "The Dynamic Volatility Connectedness of Major Environmental, Social, and Governance (ESG) Stock Indices: Evidence Based on DCC-GARCH Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 231-246, March.
    4. Lu, Ran & Xu, Wen & Zeng, Hongjun & Zhou, Xiangjing, 2023. "Volatility connectedness among the Indian equity and major commodity markets under the COVID-19 scenario," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1465-1481.
    5. Gong, Jue & Wang, Gang-Jin & Zhou, Yang & Zhu, You & Xie, Chi & Foglia, Matteo, 2023. "Spreading of cross-market volatility information: Evidence from multiplex network analysis of volatility spillovers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    6. Bouri, Elie & Lucey, Brian & Saeed, Tareq & Vo, Xuan Vinh, 2020. "Extreme spillovers across Asian-Pacific currencies: A quantile-based analysis," International Review of Financial Analysis, Elsevier, vol. 72(C).
    7. Szafranek, Karol & Rubaszek, Michał & Uddin, Gazi Salah, 2024. "The role of uncertainty and sentiment for intraday volatility connectedness between oil and financial markets," Energy Economics, Elsevier, vol. 137(C).
    8. Giannellis, Nikolaos, 2022. "Cryptocurrency market connectedness in Covid-19 days and the role of Twitter: Evidence from a smooth transition regression model," Research in International Business and Finance, Elsevier, vol. 63(C).
    9. Mensi, Walid & Ziadat, Salem Adel & Rababa'a, Abdel Razzaq Al & Vo, Xuan Vinh & Kang, Sang Hoon, 2024. "Oil, gold and international stock markets: Extreme spillovers, connectedness and its determinants," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 1-17.
    10. Rehman, Mobeen Ur & Vo, Xuan Vinh & Ko, Hee-Un & Ahmad, Nasir & Kang, Sang Hoon, 2023. "Quantile connectedness between Chinese stock and commodity futures markets," Research in International Business and Finance, Elsevier, vol. 64(C).
    11. Lang, Chunlin & Hu, Yang & Corbet, Shaen & Hou, Yang (Greg), 2024. "Tail risk connectedness in G7 stock markets: Understanding the impact of COVID-19 and related variants," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    12. Matteo Foglia & Eliana Angelini, 2020. "Volatility Connectedness between Clean Energy Firms and Crude Oil in the COVID-19 Era," Sustainability, MDPI, vol. 12(23), pages 1-22, November.
    13. Corbet, Shaen & Hou, Yang (Greg) & Hu, Yang & Oxley, Les, 2021. "Volatility spillovers during market supply shocks: The case of negative oil prices," Resources Policy, Elsevier, vol. 74(C).
    14. Sun, Qingru & Gao, Xiangyun & An, Haizhong & Guo, Sui & Liu, Xueyong & Wang, Ze, 2021. "Which time-frequency domain dominates spillover in the Chinese energy stock market?," International Review of Financial Analysis, Elsevier, vol. 73(C).
    15. Ki-Hong Choi & Ron P. McIver & Salvatore Ferraro & Lei Xu & Sang Hoon Kang, 2021. "Dynamic volatility spillover and network connectedness across ASX sector markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 677-691, October.
    16. Aharon, David Y. & Qadan, Mahmoud, 2022. "Infection, invasion, and inflation: Recent lessons," Finance Research Letters, Elsevier, vol. 50(C).
    17. Alomari, Mohammed & Selmi, Refk & Mensi, Walid & Ko, Hee-Un & Kang, Sang Hoon, 2024. "Dynamic spillovers in higher moments and jumps across ETFs and economic and financial uncertainty factors in the context of successive shocks," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 210-228.
    18. Wenting Zhang & Xie He & Tadahiro Nakajima & Shigeyuki Hamori, 2020. "How Does the Spillover among Natural Gas, Crude Oil, and Electricity Utility Stocks Change over Time? Evidence from North America and Europe," Energies, MDPI, vol. 13(3), pages 1-26, February.
    19. Fasanya, Ismail O. & Oyewole, Oluwatomisin & Dauda, Mariam, 2023. "Uncertainty due to infectious diseases and bitcoin-gold nexus: Evidence from a non-parametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 82(C).
    20. Biswas, Priti & Jain, Prachi & Maitra, Debasish, 2024. "Are shocks in the stock markets driven by commodity markets? Evidence from Russia-Ukraine war," Journal of Commodity Markets, Elsevier, vol. 34(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausecp:v:63:y:2024:i:1:p:78-105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.