Asymmetric Dynamic Spillover Effect in China's Stock Market : A Sectoral Analysis

We investigate the spillover effect of volatility among China’s stock market sectors by utilizing a volatility spillover index based on the time-varying parameter vector autoregressive (TVP-VAR) model. Our results reveal a high and time-varying volatility spillover effect among sectors, with significant asymmetry in the spillovers, mainly dominated by spillovers with “bad” volatility. Furthermore, the asymmetry of volatility spillover becomes more pronounced during a crisis like the COVID-19 pandemic. The industrial, materials, and discretionary consumer sectors are the main net transmitters, while finance and energy are the main net receivers, of spillovers. The study findings have implications for investors and policymakers