Son Duy Pham, Pranjal Srivastava, Thao Thac Thanh Nguyen
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Abstract
This study examines tail risk transmission across Indian stock sectors, employing the conditional autoregressive value-at-risk (CAViaR) model and time-varying parameter vector autoregression (TVP-VAR) methodology. We uncover substantial interconnectedness, with total connectedness indices (TCIs) for both negative and positive tail risks reflecting significant inter-sectoral dependency. Analysis highlights symmetrical tail risk transmission across sectors and identifies consumer discretionary, financial services, and industrials as pivotal in risk distribution. Crude oil volatility is pinpointed as a key factor influencing negative tail risk connectedness, notably during geopolitical upheavals. The results emphasize the constrained potential for sectoral diversification in mitigating systemic risks, advocating for advanced risk management practices and diversified investment portfolios.
期刊介绍：
The International Review of Finance (IRF) publishes high-quality research on all aspects of financial economics, including traditional areas such as asset pricing, corporate finance, market microstructure, financial intermediation and regulation, financial econometrics, financial engineering and risk management, as well as new areas such as markets and institutions of emerging market economies, especially those in the Asia-Pacific region. In addition, the Letters Section in IRF is a premium outlet of letter-length research in all fields of finance. The length of the articles in the Letters Section is limited to a maximum of eight journal pages.
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