Sectorial Connectivity Behavior in Times of Turmoil: A Comparison of a Geopolitical and Health Crises

Abstract

This research investigates the network connectivity of Qatar's stock market during periods of volatility. It shows how connectivity between sectors altered prior to, during, and after the lockdown, as well as after the peak of the COVID-19 pandemic. To do this, we employed a Bayesian Time-Varying Parameter Vector Autoregressive (TVP-VAR) connectedness approach, which permits us to display stock market contagion over time. We also employ a quantile analysis, allowing for the capture of the dynamic connectedness among sectors under heterogeneous market conditions and checking the robustness of the TVP-VAR findings. The analysis of daily sector index data from April 1, 2007, to October 20, 2021, reveals that the geopolitical crisis significantly increased sectoral connectedness more than the health crisis, shifting network patterns during periods of high market volatility. This paper contributes to the literature by being the first to specifically compare the influence of these two crisis types on the connectedness patterns of Qatar's market, employing innovative methodologies to offer deeper insights into the time-varying nature of market contagions. The findings provide substantial implications for policymakers and investors regarding crisis management and investment strategies.