Pandemic (COVID-19) News Sentiment, Economic Policy Uncertainty and Volatility Spillover in Global Leisure and Recreation Stocks

Abstract

In this work, we estimated the impact that the US VIX, economic policy and epidemic uncertainty indexes had on leisure and recreation stocks. We extended the current literature in two ways: first, we estimated the smoothed probabilities of being in ‘normal’ ( s = 1 ), ‘distress’ ( s = 2 ) and ‘crisis’ ( s = 3 ) episodes in the Refinitiv global leisure and recreation index. Then, we estimated the influence that the VIX and uncertainty indexes had on the generation of distress and crisis episodes in these stocks. By using logit regressions, we found out that only the US Economic policy uncertainty index is a detonator of distress and crisis episodes. We also found that the pandemic (COVID-19) news uncertainty has no significant and direct influence on the smoothed probabilities. Finally, and complementary to the current literature, we found that the volatility spillover effect from the S&P 500 to these stocks generates extreme volatility (crisis) episodes. Our results could be of use for practitioners and scholars and could provide a model to forecast distress and crisis episodes among leisure and recreation stocks. This model could be used for potential portfolio management or economic (tourism) policy purposes.

Citation

Bollain-Parra, L., De la Torre-Torres, O.V., Aguilasocho-Montoya, D. and del Río-Rama, M.d.l.C. (2021), "Pandemic (COVID-19) News Sentiment, Economic Policy Uncertainty and Volatility Spillover in Global Leisure and Recreation Stocks", Seabra, C., Paiva, O., Silva, C. and Abrantes, J.L. (Ed.) Pandemics and Travel (Tourism Security-Safety and Post Conflict Destinations), Emerald Publishing Limited, Leeds, pp. 141-156. https://doi.org/10.1108/978-1-80071-070-220211009