ABSTRACT
Chinese oil futures products were created in 2018, and have since presented an alternative, regional exchange through which to invest. This research tests for evidence of developing market maturity during the time since the market was established, specifically focusing on static and time-varying spillovers of higher moments between Chinese oil futures prices and other international crude oil markets. Chinese oil markets are also valuable when considering contagion and informational effects within the COVID-19 outbreak. Results indicate significant evidence of market maturity, to the extent that Chinese oil futures play a dominant role in the risk transmission of volatility, information asymmetry and extreme values, to both the international oil market and China’s domestic energy-related markets before the outbreak of the COVID-19. After the escalation of the COVID-19 pandemic, such maturity and informational effects deteriorate significantly. Such outcomes suggest that while Chinese oil futures markets were growing at pace to become a leading international oil product, the outbreak of COVID-19 has stalled such progress.
ABSTRACT
The COVID-19 pandemic presented a dynamic black-swan event to which governments implemented support programmes to reduce sectoral probability of default. This research analyses investor response to such assistance, designed to mitigate the effects of the pandemic upon international aviation and tourism. Investor confidence in such support schemes is estimated through short-term abnormal returns. Results indicate significant differential behaviour, with fiscal policy found to be a dominant and largely effective mechanism generating median abnormal returns of 2.17 %. Specific assistance programmes relating to COVID-19 loan facilities, and the provision of pandemic relief packages significantly alleviated short-term investor concerns with median abnormal returns estimated between 2.87 % and 3.89 % respectively. Our empirical results offer investors and policymakers an additional layer of information.
ABSTRACT
The ownership structures of European banks are today quite different relative to those before the Global Financial Crisis (GFC), particularly due to new takeovers, government guarantees, bailouts, and other defensive market responses post-GFC. These new ownership structures raise questions as to how these banks have performed, particularly during the implementation of non-standard central bank monetary policies in response to crises that have occurred since the GFC. This paper develops a time-varying series of changing government, private and public bank ownership structures, and compares the performance of several major European banking institutions during periods of crises and mitigating central bank actions. We specifically evaluate as to whether crisis-driven changes of ownership structure have influenced the corporate performance, resilience and signals of price discovery generated by these institutions? The COVID-19 pandemic is identified and used as an example of an idiosyncratic shock on which testing procedures are implemented. Significant differentials within the European banking system based on government supports are identified. The data examined show that the information share of price discovery among government-supported European banks is significantly higher in non-crisis periods than non-government supported banks. We present several companion tests consistent with this evidence and discuss a variety of implications for future research and policy.
ABSTRACT
Intertwined with the persisting effects of the COVID-19 pandemic on the world economy, the price of WTI crude oil futures became negative on April 20, 2020. This anomalous incident has drawn much attention within the literature. This paper attempts to investigate the origins and specific impacts of the negative pricing event on the price discovery of WTI futures by employing a bivariate VECM-DCC-GARCH-SNP model, incorporating Legendre polynomials, where the dynamics of major information share measures at high-frequency time intervals are uncovered. Time-varying patterns of information share are identified across the period surrounding negative WTI prices. In particular, price discovery effects steadily abate after a sharp shock during the eight weeks before the negative pricing event. Peak price discovery differentials then re-occur within the negative-pricing event, before once again abating. Such results verify CFTC concerns surrounding the peculiarity of WTI futures trading conditions, that is, the conditions for the negative pricing event were well-established in the weeks before April 2020. Our results shed light on stylised evidence relating to the information efficiency of the international crude oil market more generally.
ABSTRACT
In this paper, we investigate both constant and time-varying hedge ratios in terms of the effectiveness of CSI300 index futures during the COVID-19 crisis. Using naïve, OLS and EC/ROLS strategies to estimate constant hedge ratios, results indicate that the CSI300 spot index presents decreased effectiveness using the naïve hedging strategy; however, increased effectiveness of OLS and EC hedge ratios are identified. Differential behaviour is identified when considering five newly introduced COVID-19 concept-based stock indices. Time-varying hedge ratios indicate the weakened effectiveness, ranging between 20% and 40% variance reduction. Evidence suggests that the capability of the CSI300 index futures to hedge against the risks of the COVID-19 is impaired, regardless of whether constant or time-varying hedge ratios are used. Such results provide important implications to both local and foreign investors in the Chinese stock market.
ABSTRACT
We examine the interactions between cryptocurrency price volatility and liquidity during the outbreak of the COVID-19 pandemic. Evidence suggests that these developing digital products have played a new role as a potential safe-haven during periods of substantial financial market panic. Results suggest that cryptocurrency market liquidity increased significantly after the WHO identification of a worldwide pandemic. Significant and substantial interactions between cryptocurrency price and liquidity effects are identified. These results add further support to the argument that substantial flows of investment entered cryptocurrency markets in search of an investment safe-haven during this exceptional black-swan event.
ABSTRACT
Controlling for the polarity and subjectivity of social media data based on the development of the COVID-19 outbreak, we analyse the relationships between the largest cryptocurrencies and such time-varying realisation as to the scale of the economic shock centralised within the rapidly-escalating pandemic. We find evidence of significant growth in both returns and volumes traded, indicating that large cryptocurrencies acted as a store of value during this period of exceptional financial market stress. Further, cryptocurrency returns are found to be significantly influenced by negative sentiment relating to COVID-19. While not only providing diversification benefits for investors, results suggest that these digital assets acted as a safe-haven similar to that of precious metals during historiccrises.
ABSTRACT
The circumstances surrounding the outbreak of the COVID-19 pandemic have generated substantial international political strain as governments attempt to mitigate the widespread associated social and economic repercussions. One theory has focused on the potential for Chinese informational asymmetry. Using Chinese financial market data, we attempt to establish the scale and direction of information flows during multiple distinct phases of the development of the pandemic. Two specific results are identified. Firstly, the majority of domestically-traded Chinese stocks present evidence of significant information flows at a far earlier stage than internationally-traded comparatives, suggesting that domestic investors recognised the dangers associated with COVID-19 far in advance of the rest of the world. One potential explanation surrounds the view that the severity of domestically-reported Chinese news was not appropriately recognised by international investors. Secondly, while evidence of safe-haven and flight-to-safety behaviour is evident throughout traditional energy and precious metal markets, cryptocurrencies became informationally-synchronised with Chinese equity markets, indicating their use as an investor safe-haven. This is a particularly concerning outcome for international policy-maker and regulatory authorities due to the fragility of these developing markets.
ABSTRACT
Utilising Chinese-developed data based on long-standing influenza indices, and the more recently-developed coronavirus and face mask indices, we set out to test for the presence of volatility spillovers from Chinese financial markets upon a broad number of traditional financial assets during the outbreak of the COVID-19 pandemic. Such indices are used to specifically measure the performance of Chinese companies who are inherently involved in the R&D and production of materials and products used to mitigate and counteract the effects of influenza and coronavirus, therefore, such indices present a unique barometer of broad population-based sentiment relating to COVID-19 in comparison to traditional Chinese influenza. Within days of the formal announcement of the COVID-19 outbreak, results indicate exceptionally pronounced and persistent impacts of the coronavirus pandemic upon Chinese financial markets, compared to that of the traditional and long-standing influenza index. Further, in a novel finding to date, COVID-19 is found to have had a substantial effect on directional spillovers upon the Bitcoin market. Cryptocurrency-based confidence appears to have been instigated through government-developed education schemes, which are identified as one possible explanation for our results, which are found to remain robust across both data-frequency and methodological variation.
ABSTRACT
In the midst of the 2020 global COVID-19 pandemic and subsequent financial market collapse, corporate entities have to navigate a number of truly unforeseen contagion risks. However, one such group included those who shared their corporate identity with aspects of the rapidly evolving coronavirus. Our results indicate the existence of sharp, dynamic and new correlations between companies related to the term 'corona', outside of pre-existing interrelationships. We provide a number of observations as to why this situation occurred.