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Time-Varying Spillover Effects on Sectoral Equity Returns

Authors

  • Hatice Ozer Balli,

    1. School of Economics and Finance, Massey University, Palmerston North, New Zealand
    2. Department of Economics, Suleyman Sah University, Istanbul, Turkey
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  • Faruk Balli,

    Corresponding author
    1. Department of Business Administration, Suleyman Sah University, Istanbul, Turkey
    • School of Economics and Finance, Massey University, Palmerston North, New Zealand
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  • Rosmy Jean Louis

    1. Department of Economics and Finance, Faculty of Management, Vancouver Island University, Nanaimo, BC, Canada
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Faruk Balli

School of Economics and Finance

Massey University

Private Bag 11-222

Palmerston North

New Zealand

f.balli@massey.ac.nz

Abstract

In this paper, we investigate the integration of the Euro- and US-wide sector equity indices by focusing on the return, volatility, and trend spillover effects of local and global shocks. We explore that unlike volatility spillovers, return spillovers are not significant enough to explain sector equity returns. Moreover, we are able to show that when the trend is incorporated into the volatility spillover analysis, a number of sector equity indices tend to react similarly to local and global shocks. Following this path, we arrive at four major sector groups: production and industry; consumer goods and services; financial; and technology, media, and telecommunication across Euro- and US-wide sector equity indices.

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