Dynamic Connectedness and Risk Transmission Among Global Sectoral Indices: Findings from COVID-19 and the Russia-Ukraine War

Authors : Emrah Şahin

Pages : 154-172

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Publication Date : 2025-12-31

Article Type : Research Paper

Abstract :This study explores the dynamic relationships and volatility spillovers among global sectoral indices during the Covid-19 pandemic and the Russia–Ukraine war. It evaluates changes in the connectedness of sectoral indices throughout both crisis periods. The finance, materials, industrials, health care, energy, and consumer staples sectors—represented by the MSCI ACWI indices—are analysed using the TVP-VAR-SV model. The findings reveal significant increases in cross-sectoral connectedness during both crises. During the pandemic, the health care sector was at the core of the connectedness network, exhibiting strong linkages with other sectors. Conversely, during the war, the energy sector assumed a central role, with intensified interactions particularly between the energy sector and the health care, financial, and industrials sectors. Marked increases in volatility were observed in the health care and financial sectors during the pandemic, and in the energy and materials sectors during the war. In the financial sector, short-term shocks predominated during the war, whereas in the energy and health care sectors, short-term shocks in the early phase gave way to long-term, persistent shocks later on. Over time, a changing impulse–response dynamic emerged: short-term effects dominated the health care and industrials sectors during the pandemic, while long-term impacts were more prevalent in the financial and consumer staples sectors. Furthermore, the results underscore the financial sector’s leading role in transmitting risk across sectors during both crisis periods.
Keywords : Covid-19, Rusya Ukrayna Savaşı, MSCI ACWI, TVP-VAR-SV

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