Dynamic spillovers between precious metals and travel &tourism stocks in South-East Asia: do infectious diseaseoutbreaks matter?

Abstract

The interconnection between travel and leisure industry and pre-cious metals markets has attracted a lot of interest among invest-ors, policy makers, practitioners and market participants. Weinvestigate the role of infectious diseases-based uncertainty onthe dynamic connectedness between Southeast Asia travel andtourism stocks indices and four major precious metals namely;gold, silver, palladium, and platinum over the period 31 March2015 to 5 February 2021. We adopt the time-varying parametervector autoregressions (TVP-VAR) and the nonparametric causal-ity-in-quantiles approach for its methodological superiority overlinear approaches in capturing the presence of causality at differ-ent quantiles of the commodity distribution. The following is dis-cernible from our analyses. First, we find strong spilloversbetween the two markets, implying there are diversificationoptions. Second, silver and platinum are best effective portfoliodiversification tools among precious metals. Third, strong evi-dence of nonlinearity makes it crucial for consideration whenexamining the role of diseases-based uncertainty in affecting theinteractions between travel and tourism stocks and metals mar-kets. Lastly, connectedness between uncertainty due to infectiousdiseases and the markets is stronger mostly around the lowerand normal quantiles. These results have important policy implica-tions for policymakers and market participants.