Dynamic Connectedness among Australian Stock Market Sectors: A Time-Varying Parameter VAR Approach

This study investigates the dynamic connectedness among six key sectors in the Australian Stock Exchange (ASX) using a Time-Varying Parameter Vector Autoregressive (TVP-VAR) model. By examining the interactions among Consumer Staples, Energy, Financials, Industrials, Information Technology, and Metals & Mining indices, the analysis highlights how sectoral connectedness evolves, particularly during periods of economic crisis. The results reveal that specific sectors act as net transmitters or receivers of shocks. Energy, Metals, & Mining are more sensitive to global commodity prices, while Consumer Staples maintain stability. This approach offers a comprehensive view of sectoral risk transmission and its implications for market stability and risk management. The findings provide critical insights for investors and policymakers aiming to mitigate systemic risks and enhance portfolio diversification in response to market fluctuations.