From pandemic to systemic risk: contagion in the U.S. tourism sector

ABSTRACT

This paper investigates the interconnectedness among 95 tourism firms in the U.S. over the 2018–2020 period with a focus on the impact of the Covid-19 pandemic. The results using tail risk spillover analysis show that the level of risk contagion significantly increased during the Covid-19 pandemic. Small tourism firms become more systemically important during the Covid-19 pandemic while the level of bad risk contagion has a negative impact on the stock performance of US tourism firms.

KEYWORDS:

• Covid-19
• US tourism
• tail event-driven network
• bad bad contagion

JEL CLASSIFICATION:

• G15
• F36
• F65

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In our case, the VaR is calculated at 5%.

2 Refer to Härdle et al. (2016) for details about the parameters’ estimation using moving window w.

3 To save space, we only present the graphs for four stocks in the text. Those of the other 91 firms are available upon request.

4 A complete list of the 95 firms in the sample with indications on their ticker and complete names are available upon request.

5 See Härdle et al. (2016) for further details.

6 We also calculate the bad-bad contagion index developed by Londono (2019) as a robustness check and results are similar. Those results are available from authors on request.