Abstract
The purpose of the study is to analyse shock spillovers and network connectedness between and within sectoral emerging and developed equity markets distinguished by their degree of resource abundance. Furthermore, the study assesses the extent of portfolio optimisation between these equity markets. Daily data from the year 2001 to 2022 of Financials, Industrials and Resources of US, China, Japan and Turkeyi obtained from Data Stream was used. The analysis incorporates methodologies by Diebold and Yilmaz (2009, 2012, and 2014) and Mean-Variance methodologies based were used to analyse the data. In our analysis, we discovered that in both, the developed markets and Turkeyi, the Financials and Industrials sectors serve as net transmitters of spillovers, with a particular emphasis on Industrials, which also holds the highest portfolio weights in these markets. We observed that the portfolio's Sharpe ratio was at its peak in developed markets and notably lower in emerging markets. Furthermore, in our multi-country analysis, we observed that developed markets consistently leaned towards investments in the Industrials and Resources sectors. Conversely, in countries that are not resource-abundant, the portfolio preferred the Industrial and Resources sectors. These findings underscore the sector preferences within various market types and their impact on spillovers and portfolio performance.
Keywords: Spillovers, Financials, Industrials, Resources, Connectedness, Resource
Abundance.