Can COVID-19 deaths and confirmed cases predict the uncertainty indexes? A multiscale analysis

Purpose: This study aims to examine the multiscale predictability power of COVID-19 deaths and confirmed cases on the S&P 500 index (USA), CAC30 index (France), BSE index (India), two strategic commodity futures (West Texas intermediate [WTI] crude oil and Gold) and five main uncertainty indices Equity Market Volatility Ticker (EMV), CBOE Volatility Index (VIX), US Economic Policy Uncertainty (EPU), CBOE Crude Oil Volatility Index (OVX) and CBOE ETF Gold Volatility Index (GVZ). Furthermore, the authors analyze the impact of uncertainty indices and COVID-19 deaths and confirmed cases on the price returns of stocks (S&P500, CAC300 and BSE), crude oil and gold. Design/methodology/approach: The authors used the wavelet coherency method and quantile regression approach to achieve the objectives. Findings: The results show strong multiscale comovements between the variables under investigation. Lead-lag relationships vary across frequencies. Finally, COVID-19 news is a powerful predictor of the uncertainty indices at intermediate (4–16 days) and low (32–64 days) frequencies for EPU and at low frequency for EMV, VIX, OVX and GVZ indices from January to April 2020. The S&P500, CAC30 and BSE indexes and gold prices comove with COVID-19 news at low frequencies during the sample period. By contrast, COVID-19 news and WTI oil moderately correlated at low frequencies. Finally, the returns on equity and commodity assets are influenced by uncertainty indices and are sensitive to market conditions. Originality/value: This study contributes to the literature by exploring the time and frequency dependence between COVID-19 news (confirmed and death cases) on the returns of financial and commodity markets and uncertainty indexes. The findings can assist market participants and policymakers in considering the predictability of future prices and uncertainty over time and across frequencies when setting up regulations that aim to enhance market efficiency. © 2023, Emerald Publishing Limited.

Spillover and connectedness among G7 real estate investment trusts: The effects of investor sentiment and global factors

This paper examines the dynamic spillover interconnectedness of G7 Real Estate Investment Trusts (REITs) markets. We use the spillover index of Diebold and Yilmaz (2012), the time-varying parameters vector-autoregression (TVP-VAR) model, and the quantile regression approach. The result show that REITs network connectedness is dynamic and experiences an abrupt increase in the first wave of COVID-19 outbreak (2020Q1). We also observe a substantial abrupt decrease in connectedness during the success of vaccination programs (end 2021). The connectedness among assets is much stronger during COVID-19 than before. The REITs of Japan and Italy are net receivers of spillover and those of US and UK are net transmitters of spillovers before and during COVID-19. Conversely, the REIT of Canada and Germany (France) switches from net receivers (contributors) of spillovers before the pandemic to net contributors (receivers) during the COVID-19. Finally, we show that News Sentiment index, Geopolitical Risk index, Economic Policy Uncertainty index, US Treasury yield, and Stock Volatility index influence the spillover magnitude across quantiles. © 2023 Elsevier Inc.

Quantile spillovers and connectedness analysis between oil and African stock markets

This study examines the spillovers and connectedness between oil and the African stock markets under bearish, normal, and bullish market conditions. Using the quantile connectedness method, we find higher spillovers under bearish market conditions than in both tranquil and bullish market conditions. Oil is a net transmitter of spillovers in the African markets. Furthermore, Ghana, Kenya, Nigeria, and South Africa are net receivers of spillovers, and Tunisia, Egypt, Morocco, and Mauritius are net transmitters of spillovers in the lower quantile. In the median quantile, Ghana shifts to being a net transmitter of spillovers, whereas Egypt becomes a net receiver of spillovers. In the upper quantiles, all markets are net transmitters of spillovers, except for Mauritius and Egypt. We find a strong connectedness between oil and the Nigerian market during bearish and tranquil market conditions which alleviates the bullish market scenario. Moreover, spillovers reached the maximum level in early 2020, corresponding to the first wave of the COVID-19 pandemic. The portfolio analysis shows that an optimally weighted portfolio offers the best downside risk for all markets. The hedged portfolio offers the best risk reduction for all economies. © 2023 Economic Society of Australia, Queensland

Spillovers and tail dependence between oil and US sectoral stock markets before and during COVID-19 pandemic

Purpose: This paper examines the extreme dependence and asymmetric risk spillovers between crude oil futures and ten US stock sector indices (consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication and utilities) before and during COVID-19 outbreak. This study is based on the rationale that stock sectors exhibit heterogeneity in their response to oil prices depending on whether they are classified as oil-intensive or non-oil-intensive sectors and the possible time variation in the dependence and risk spillover effects. Design/methodology/approach: The authors employ static and dynamic symmetric and asymmetric copula models as well as Conditional Value at Risk (VaR) (CoVaR). Finally, they use robustness tests to validate their results. Findings: Before the COVID-19 pandemic, crude oil returns showed an asymmetric tail dependence with all stock sector returns, except health care and industrials (materials), where an average (symmetric tail) dependence is identified. During the COVID-19 pandemic, crude oil returns exhibit a lower tail dependency with the returns of all stock sectors, except financials and consumer discretionary. Furthermore, there is evidence of downside and upside risk asymmetric spillovers from crude oil to stock sectors and vice versa. Finally, the risk spillovers from stock sectors to crude oil are higher than those from crude oil to stock sectors, and they significantly increase during the pandemic. Originality/value: There is heterogeneity in the linkages and the asymmetric bidirectional systemic risk between crude oil and US economic sectors during bearish and bullish market conditions;this study is the first to investigate the average and extreme tail dependence and asymmetric spillovers between crude oil and US stock sectors. © 2023, Emerald Publishing Limited.

Quantile dependencies and connectedness between the gold and cryptocurrency markets: Effects of the COVID-19 crisis

This paper examines the quantile dependence, connectedness, and return spillovers between gold and the price returns of leading cryptocurrencies, using quantile cross-spectral, the return spillovers based the quantile VAR, and quantile connectedness approaches. The results show that the dependencies within cryptocurrencies are highly symmetric and sensitive to different quantile arrangements. Under normal market conditions, we find a high positive dependence within cryptocurrencies and a low positive dependence between cryptocurrencies and gold. The dependence is higher at long term than intermediate- and short- terms before the pandemic during bearish market conditions. In contrast, the degree of dependence decreases at the intermediate- and long-terms during COVID-19 period than before. Moreover, the magnitude of return spillovers is higher at lower quantile (bearish market) than upper quantile (bullish market). Gold serves as a safe haven and diversifier asset for cryptocurrencies during COVID-19 outbreak at both intermediate and long terms. © 2023 Elsevier B.V.

Spillovers and connectedness between Chinese and ASEAN stock markets during bearish and bullish market statuses

Purpose: This study aims to examine the tail connectedness between the Chinese and Association of Southeast Asian Nations (ASEAN) stock markets. More specifically, the authors measure the return spillovers at three quantile levels: median (t = 0.5), lower extreme (t = 0.05) and upper extreme (t = 0.95). The connectedness at extreme upper and lower quantiles provides insightful information to investors regarding tail risk propagation, which ultimately suggests that investors adjust their portfolios according to the extreme bullish and bearish market conditions. Design/methodology/approach: The authors employ the quantile connectedness approach of Ando et al. (2022) to examine the quantile transmission mechanism among the ASEAN and Chinese stock markets. Findings: The results show significant evidence of a higher level of connectedness between Chinese and ASEAN stock markets at extreme upper and lower quantiles compared to the median quantiles, which suggests the use of a quantile-based connectedness approach instead of an average-measure-based one. Furthermore, the time-varying connectedness analysis shows that the total spillovers reach the highest peaks during the global financial crisis, the Chinese stock market crash and the COVID-19 pandemic at the upper, lower and median quantiles. Finally, the static and dynamic pairwise spillovers between the Chinese and ASEAN markets vary over quantiles as well. Originality/value: This study is the first attempt to examine quantile vector autoregression (VAR)-based return spillovers between China and ASEAN stock markets during different market statuses. Besides, the COVID-19 has intensified the uncertainty in Asian countries, mainly China and ASEAN economies. © 2023, Emerald Publishing Limited.

Impacts of COVID-19 on dynamic return and volatility spillovers between rare earth metals and renewable energy stock markets

We examine the time-frequency co-movements and return and volatility spillovers between the rare earths and six major renewable energy stocks. We employ the wavelet analysis and the spillover index methodology from January 1, 2018 to May 15, 2020. We report that the COVID-19-triggered significant increase in co-movements and spillovers in returns and volatility between the rare earths and renewable energy returns and volatility. The rare earths act as net recipient of both return and volatility spillovers, while the clean energy stocks are net transmitters of return and volatility spillovers before and during the COVID-19 crisis. The solar and wind stocks are net transmitters/receivers of spillovers before/during the pandemic. The remaining markets shift from net spillover receivers to transmitters or vice versa;evidencing the effects of the pandemic. Our results show that cross-market hedge strategies may have their efficiency impaired during the periods of crises implying a necessity of portfolio rebalancing. © 2022 The Authors

Does safe haven exist? Tail risks of commodity markets during COVID-19 pandemic

This paper investigates the tail behavior patterns of commodity assets, the risk exposure of these assets, and how they rank given their safe haven properties. We use state-of-the-art dynamic generalized autoregressive score models to jointly estimate tail risk measures for ten commodity assets (aluminum, copper, crude oil, gasoline, gold, heating oil, lead, soybeans, tin, and wheat) over the period from September 14, 2011 to June 30, 2021. Our in-sample findings suggest that aluminum outperforms gold as a safe haven in both pre- and COVID-19 times. The out-of-sample results confirm that aluminum retains its leading role during the COVID-19 pandemic. These findings bear implications for constructing well-diversified portfolios which is vital for investors, portfolio managers, and financial advisors, and for policymakers to design policies that ensure financial stability during periods of market turmoil, such as the COVID-19 pandemic. © 2022 Elsevier B.V.

Multifractality during upside/downside trends in the MENA stock markets: the effects of the global financial crisis, oil crash and COVID-19 pandemic

Purpose This paper examines asymmetric multifractality (A-MF) in the leading Middle East and North Africa (MENA) stock markets under different turbulent periods (global financial crisis [GFC] and European sovereign debt crisis [ESDC], oil price crash and COVID-19 pandemic). Design/methodology/approach This study applies the asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) method of Cao et al. (2013) to identify A-MF and MENA stock market efficiency during the COVID-19 pandemic. Findings The results show strong evidence of different patterns of MF during upward and downward trends. Inefficiency is higher during upward trends than during downward trends in most of the stock markets in the whole sample period, and the opposite is true during financial crises. The Turkish stock market is the least inefficient during upward and downward trends. A-MF intensifies with an increase in scales. The evolution of excessive A-MF for MENA stock returns is heterogeneous. Most of the stock markets are more inefficient during a pandemic crisis than during an oil crash and other financial crises. However, the inefficiency of the Saudi Arabia and Qatar stock markets is highly sensitive to oil price crashes. Overall, the level of inefficiency varies across market trends, scales and stock markets and over time. The findings of this study provide investors and policymakers with valuable insights into efficient investment strategies, risk management and financial stability. Originality/value This paper first explores A-MF in the MENA emerging stock markets. The A-MF analysis provides useful information to investors regarding asset allocation, portfolio risk management and investment strategies during bullish and bearish market states. In addition, this paper examines A-MF under different turbulent periods, such as the GFC, the ESDC, the 2014-2016 oil crash and the COVID-19 pandemic.

The impacts of COVID-19 crisis on spillovers between the oil and stock markets: Evidence from the largest oil importers and exporters

This study examines the multiscale spillovers and nonlinear causalities between the crude oil futures market and the stock markets of the United States (US), Canada, China, Russia, and Venezuela before and during the COVID-19 pandemic. Using the wavelet coherency method, we find strong co-movement between the oil futures market and these five stock markets, particularly from March 2020 to May 2020 (initial period of the COVID-19 outbreak) at high frequency. Furthermore, we find positive co-movements at low frequency during the overall COVID-19 period. This finding suggests that the bearish trend of stock markets is associated with a downward movement in oil prices. Using the wavelet-based Granger causality approach, we find that the oil and stock indices have less co-movement on a smaller scale but greater movement on a larger scale across all periods. As an exception, the Russian market is significantly influenced by oil prices, even on a small scale, before the COVID-19 period, but not after the beginning of the pandemic. We also find effects in the opposite direction—the Canadian and U.S. markets influence oil prices on a small scale during the COVID-19 period, an effect that is not visible for the U.S. market in the pre-COVID-19 sample. The results also show a significant bidirectional causality from oil to stock markets and vice versa during Russian-Saudi oil price war at high scale. Furthermore, we find that investors should hold more oil futures than stock shares in their portfolios for all periods. This evidence confirms that oil instruments are important for hedging during normal periods and act as safe-haven assets during crisis periods. We observe that the U.S. and Canadian stock markets were more affected by oil price shocks than were other countries. © 2021 Economic Society of Australia, Queensland

Co-movements among precious metals and implications for portfolio management: A multivariate wavelet-based dynamic analysis

This paper investigates the co-movements among precious metals (gold, silver, platinum, and palladium) across time-frequency domains and investment horizons and its implications for dynamic hedging, asset allocation, and utility gains. Based on a multiple wavelet coherence analysis, combined with Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroscedasticity (DCC-GARCH). The uni-directional co-movement is sequential, running from gold to the remaining metals. Silver leads platinum and palladium in returns, and platinum leading palladium. Interestingly, silver and platinum combined contribute to the variability of gold, while gold, silver, and palladium contribute to the variability of platinum, suggesting that some lead-lag relationships are complex and strengthened by multivariate relationships among the metals. The lead-lag dependence is high at medium and long investment horizons and responds to economic, political, and pandemic shocks to the global economy. We find that a wavelet-based dynamic hedging strategy performs better than a conventional hedging strategy. Portfolio weights from the bivariate, three-dimensional, and four-dimensional wavelet analyses vary across investment horizons. Finally, utility gains are higher at long horizons for all multi-dimensional risk strategies, whereas the utility gains are lower with the onslaught of the COVID-19 pandemic. © 2021 Elsevier Ltd

Good and bad high-frequency volatility spillovers among developed and emerging stock markets

Purpose This paper examines dynamic return spillovers and connectedness networks among international stock exchange markets. The authors account for asymmetry by distinguishing between positive and negative returns. Design/methodology/approach This paper employs the spillover index of Diebold and Yilmaz (2012) to measure the volatility spillover index for total, positive and negative volatility. Findings The results show time-varying and asymmetric volatility spillovers among the stock markets under investigation. During the coronavirus disease 2019 (COVID-19) pandemic, bad volatility spillovers are more pronounced and dominated over good volatility spillovers, indicating contagion effects. Originality/value The presence of confirmed COVID-19 cases positively (negatively) affects the good and bad spillovers under low and intermediate (upper) quantiles. Both types of spillovers at various quantiles agree also influenced by the number of COVID-19 deaths.

Does oil price variability affect the long memory and weak form efficiency of stock markets in top oil producers and oil Consumers? Evidence from an asymmetric MF-DFA approach

This study examines the asymmetric multifractality and the market efficiency of the stock markets in the countries that are the top crude oil producers (USA, KSA, Canada and Russia) and consumers (Brazil, China, India, and Japan) using an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) method. The results show evidence of an asymmetric multifractal nature for all markets. Moreover, the multifractality is stronger in the upward movement of the market returns, except in China. The degree of efficiency of the stock markets is shown to be time-varying and experienced a decrease during the 2008 global financial crisis (GFC), but an upside trend occurred during the recent oil price crash followed a significant decline during COVID-19. The stock markets have an anti-persistent feature during GFC and COVID-19, whereas they exhibit a long-term persistent feature during oil price crash. More interestingly, the efficiency of the stock markets of crude oil producers is lower in general than that of oil consumers. Furthermore, the efficiency of the stock market is lower in the downward movement of the market returns than in the upward movement. Asymmetry and oil price uncertainty index are the key driver of the stock markets and can serve as predictor of the stock market dynamics of top oil producers and top oil consumers particularly during COVID-19 and oil price crash. © 2021 Elsevier Inc.