Exchange rate volatility connectedness during Covid-19 outbreak: DECO-GARCH and Transfer Entropy approaches

Motivated by the severe impacts of the Covid 19 outbreak on the global trade and capital flows, which can shift the forex market structure, this paper aims to examine the equicorrelation and causal association across major currency markets during Covid 19 pandemic using novel approaches: DECO-GARCH and Transfer Entropy. We find that major exchange rate markets have a positive equicorrelation, and these trends have been more pronounced during the Covid-19 crisis, uncovering the existence of contagion effects. The results also show the causal associations between the currency markets, depicted by three categories: no effect, mono-direction, and bi-direction. Such connections unveil the shock sender and receiver in the examined exchange rate markets, supporting that there is contagion risk across currency markets. Our findings suggest important implications for investors, firms, and policymakers in risk management during crisis periods. © 2022 Elsevier B.V.

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.