Spillover effects from partisan conflict and trade & immigration policy uncertainty to US travel and leisure stocks: a time-frequency analysis

This study uses the time-varying parameter vector autoregression (TVP-VAR) based connectedness approach to explore the effects of partisan conflict, trade policy uncertainty, and immigration policy uncertainty on the return and volatility of travel and leisure stocks in the US markets. The empirical results show that partisan conflict has the strongest spillover; the trade and immigration policy uncertainties are the spillover transmitters; travel and leisure stocks are the main receivers. In the time-domain, the spillover effect is time-varying, which increases significantly in times of crisis, especially during the COVID-19 and the Russia–Ukraine Conflict. In the frequency-domain, long-term spillover is more significant than short-term spillover. Compared with returns, volatility is more sensitive to uncertainties and has a much more complex spillover path. Among travel and leisure stocks, airline stocks are most vulnerable to uncertainty shocks, whereas gambling stocks are more rigid than other stocks. Our results have important implications for investment decisions, policy-making, and coping with risks arising from uncertainty.