Volatility Spillover among Japanese Sectors in Response to COVID-19

Round 1

Reviewer 1 Report

I read the paper with great interest and enthusiasm. The authors have shown good understanding of the area of research and data analysis. I am particularly impressed with the robustness of data analysis and presentation of findings.

 

 

Author Response

Thank you for your comments.
To provide the background of the paper in detail and cite more literature in the introduction section, we corrected the whole part of the section and colored the updated pieces. And, to improve our English, we sent for proofreading.

Reviewer 2 Report

 

I enjoyed reading this paper. I think that the authors cover an important topic that does not receive enough attention in the existing academic literature. The authors follow a clear and well explained methodology. I have a few suggestions that I think will further help improve the paper hopefully increasing the number of people reading it.

 

1)       I think that the paper will benefit from a qualitative explanation of the market situation in Japan pre and post Covid. This would be beneficial for readers that are not too familiar with this specific equity market. For example, it could be discussed the proportion of local and foreign investors participation in the market, or the proportion of retail and institutional investors.

2)       It would be interesting to have a comment about the applicability of this type of analysis to other markets (non-Japan markets). The Japanese market has some unique characteristic and it would be interesting to see the comments of the authors in this regard.

3)       Another important consideration is mentioning if there were any specific measures introduced by the authorities in the equity market during the Covid outbreak that might have impacted market performance/spillovers.

4)       I think that it is worth mentioning why 17 sectors were selected. 17 is a decent number but perhaps an explanation why these 17 sector would be useful. Data availability?

Author Response

Thank you for your comments.

To provide the background of the paper in detail and cite more literature in the introduction section, we corrected the whole part of the section and colored the updated pieces. And, to improve our English, we sent for proofreading.

 

1) I think that the paper will benefit from a qualitative explanation of the market situation in Japan pre and post Covid. This would be beneficial for readers that are not too familiar with this specific equity market. For example, it could be discussed the proportion of local and foreign investors participation in the market, or the proportion of retail and institutional investors.

 

Response: We added the information about the Japanese stock market, the value of equity holdings, the proportion of retail and institutional investors, and the proportion of foreign investors, in footnote four on page 2.

 

2) It would be interesting to have a comment about the applicability of this type of analysis to other markets (non-Japan markets). The Japanese market has some unique characteristic and it would be interesting to see the comments of the authors in this regard.

 

Response: Shahzad et al. (2021) and Costa et al. (2021) have already investigated the other market cases of the Chinese and the U.S. stock market. Therefore, we added the discussion section and explained their market results in section 4 on pages 15 and 16.

 

Shahzad, Naeem, Peng, and Bouri (2021). Asymmetric volatility spillover among Chinese sectors during COVID-19. International Review of Financial Analysis.

Costa, Matos, and Silva (2021), Sectoral connectedness: New evidence from U.S. stock market during COVID-19 pandemics, Finance Research Letters.

 

3) Another important consideration is mentioning if there were any specific measures introduced by the authorities in the equity market during the Covid outbreak that might have impacted market performance/spillovers.

 

Response: We added it in section 4 in lines 340–341.

 

4) I think that it is worth mentioning why 17 sectors were selected. 17 is a decent number but perhaps an explanation why these 17 sector would be useful. Data availability?

 

Response: We added the explanation about the TOPIX-17 series in footnote five on pages 2 and 3.

Reviewer 3 Report

Thank you for allowing me to review this interesting paper. To improve the paper I propose:

1. Add the most relevant citations, at least 20 of the. Like literature review.

2. In the abstract be more concise, what is a pre-covid-19 period (from 1900-2019)?

3. When the abbreviation arises for the first time please write it in the whole words (US, UK, RV, RS, TOPIX-17 ...).

4. I think that from the introduction some information could be deleted such as data period etc. Add motivation, aim, objectives, specific objectives and research hypotheses.

5. Also move the whole paragraph from intro to conclusions: This research contributes to the existing research as follows /.../

6. Add citations to the methodology. For example, VAR is not your own proof, probably it is Johansen or similar,... Cite!

7. Maybe you can write VAR in matrix expression?

8. Insert the paper in the JRFM format, so I can easily check the tables and pictures, which are now at the end of the text

9. Add a discussion section and write down similarities and differences between the model used (RV, RS and dynamic). Then I will read the results again.

Good luck!

Author Response

Thank you for your comments.

To provide the background of the paper in detail and cite more literature in the introduction section, we corrected the whole part of the section and colored the updated pieces. And, to improve our English, we sent for proofreading.

 

1. Add the most relevant citations, at least 20 of the. Like literature review.

 

Response: We added some literature, and the relevant citation becomes 28.

2. In the abstract be more concise, what is a pre-covid-19 period (from 1900-2019)?

 

Response: We modified the point on page 1, the line from 10 to 12.

 

3. When the abbreviation arises for the first time please write it in the whole words (US, UK, RV, RS, TOPIX-17 ...).

 

Response: We corrected them, like in line 41 (US), line 52 (UK), line 82 (RS), footnote 5 (TOPIX-17), and line 85 (RV).

 

4. I think that from the introduction some information could be deleted such as data period etc. Add motivation, aim, objectives, specific objectives and research hypotheses.

 

Response: For the introduction section, we rewrote the whole part and added the motivation, aim, and hypothesis on page 2, lines 73–78.

 

5. Also move the whole paragraph from intro to conclusions: This research contributes to the existing research as follows /.../

 

Response: We moved the pointed part from the introduction section to the conclusion and discussion section.

 

6. Add citations to the methodology. For example, VAR is not your own proof, probably it is Johansen or similar,... Cite!

 

Response: We added and cited Sims (1980).

 

Sims (1980). Macroeconomics and reality, Econometrica.

 

7. Maybe you can write VAR in matrix expression?

 

Response: We added the VAR model in matrix expression under line 101.

 

8. Insert the paper in the JRFM format, so I can easily check the tables and pictures, which are now at the end of the text.

 

Response: Although we tried to insert the paper in the JRFM format, we did not have time because the revision deadline was within ten days. However, to quickly check tables and figures, we relocated them.

 

9. Add a discussion section and write down similarities and differences between the model used (RV, RS and dynamic). Then I will read the results again.

 

Response: We added the discussion section on page 16, the line from 320 to 341.

Round 2

Reviewer 3 Report

Dear authors. 

Please do your revision as proposed, for example:

1. I don't see any new literature. Maybe not tracked?

2. In the abstract pre covid-19 and covid-19 period are not clear. Add years.

3. The paper is not in JRFM format/template.

4. Tables are unreadable. Make them more reader friendly. 

4. Etc.

Please do it properly. 

Good luck. 

Author Response

Thank you for your comments.
We corrected the manuscript as follows:

1. I don’t see any new literature. Maybe not tracked?

Response:
We highlighted new literature in yellow.

2. In the abstract, pre-covid-19 and covid-19 periods are not clear. Add years.

Response:
We added years in the abstract in lines 7–8.

3. The paper is not in JRFM format/template.

Response:
We changed to the JRFM format.

4. Tables are unreadable. Make them more reader-friendly.

Response:
To be easier to read, we rounded digits and highlighted the diagonal element in bold and italics in Tables 3-5. Additionally, we introduce horizontal lines in the tables to improve readability further.

Round 3

Reviewer 3 Report

I think the paper is improved.

Citation Sims 1980 could be accompanied by Johansen and/or Juselius VAR. So, add these two.

Good luck!

Author Response

Thank you for your comments.
We corrected the manuscript as follows:

1. Citation Sims 1980 could be accompanied by Johansen and/or Juselius VAR. So, add these two.

Response:
We cited the seminal papers of Johansen (1988) and Johansen & Juselius (1990).
Please ensure the citation is on the 3rd page in line 98 of the paper.

References:
Johansen, S. (1988). Statistical analysis of cointegrating vectors. Journal of Economic Dynamic and Control, 12, 231-254.
Johansen, S. & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52, 169-210.