Investigating extreme linkage topology in the aerospace and defence industry

Elie Bouri, Barry Quinn, Lisa Sheenan, Yayan Tang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper analyses return and volatility spillovers among 21 global aerospace and defence (A&D) companies from six countries and three continents using quantile-based models and daily data from August 23, 2010, to July 1, 2022. The results show that both return and volatility spillovers vary over time, and those estimated at normal market conditions, intensify during COVID-19 and Russia–Ukraine war periods. Spillovers of returns estimated at lower and upper quantiles exceed those estimated at the middle quantile. Volatility spillover is extremely high at the upper quantile and exhibits low variability. Chinese defence stocks are segmented from the rest under normal return conditions and a moderate volatility state. In contrast, they are somewhat integrated under extreme return conditions and volatility states. Hence, Chinese defence stocks entail more diversification benefits under normal conditions than in bear or bull markets. Further analysis shows that geopolitical risk consistently plays a significant role in driving both returns and volatility spillovers, especially during the pandemic and war periods, without ignoring the role of macroeconomic and financial variables.

Original languageEnglish
Article number103166
JournalInternational Review of Financial Analysis
Early online date13 Mar 2024
Publication statusPublished - May 2024

Bibliographical note

Publisher Copyright:
© 2024


  • Aerospace and defence companies
  • COVID-19
  • Quantile vector-autoregression (QVAR)
  • Russia
  • Ukrainian war

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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