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.

Comovements and hedging effectiveness between conventional and Islamic cryptocurrencies: evidence from the COVID-19 pandemic

Purpose: This study examines the dynamics of the comovement and causal relationship between conventional (Bitcoin, Ethereum and Binance coin) and Islamic (OneGram, X8X token and HelloGold) cryptocurrencies. Design/methodology/approach: This study uses wavelet coherence approach to examine the time-varying lead-lag relationship between conventional and Islamic cryptocurrencies. Furthermore, the authors use BEKK-GARCH model to estimate the optimal weights, hedge ratio and hedging effectiveness in pre-COVID-19 and during the COVID-19 period. Findings: The authors find no significant comovement in pre-COVID-19. However, the authors find significant positive comovement in conventional and Islamic cryptocurrencies at the beginning of the pandemic, and in most cases, conventional cryptocurrencies are leading. X8X and HelloGold have no/weak correlation with conventional cryptocurrencies, implying that investors can diversify the risk by making an Islamic and conventional cryptocurrencies portfolio. The authors also calculate the optimal weights, hedge ratio and hedging effectiveness using the BEKK-GARCH model. Based on the optimal weights, for the portfolios of conventional–Islamic cryptocurrencies, investors are suggested to increase their investment in Islamic cryptocurrencies during the COVID-19 than normal period. The results of hedge ratios show that hedging costs are higher during COVID-19 than before. Practical implications: The findings of the paper offer several practical policy implications for investors, portfolio manager, Shariah advisors and policymakers pertaining to asset allocation, risk management, forecasting and diversification. Specifically, investors can maximize the risk adjusted returns of their conventional cryptocurrencies portfolio by adding some portions of Islamic cryptocurrencies. Considering the comovement is time-varying, investors/manager should adjust their investment strategies frequently. For the entrepreneurs in crypto-industry, it is advised to introduce new Islamic cryptocurrencies, as it has a huge growth potential because of their distinct features and performance. Originality/value: This is the first study that explores the linkages between conventional and Islamic cryptocurrencies, therefore this study extends the literature of Islamic finance, stablecoins and cryptocurrencies in pre-COVID-19 and during COVID-19 period. The study results provide insights to conventional crypto investor on how to manage their portfolio during normal and turbulent period. © 2023, Emerald Publishing Limited.

Do oil shocks affect the green bond market?

This study examines the predictive power of oil shocks for the green bond markets. In line with this aim, we investigated the extent to which oil shocks could be used to accurately make in- and out-of-sample forecasts for green bond returns. Three striking findings emanated from our results: First, the three types of oil shock are reliable predictors for green bond indices. Second, the performances of the predictive models were consistent across the different forecasting horizons (i.e. H = 1 to H = 24). Third, our findings were sensitive to classifying the dataset into pre-COVID and COVID eras. For instance, the results confirmed that the predictive power of oil shocks declined during the crisis period. We also discuss some policy implications of this study's findings. © 2022 The Author(s)

Flights-to-quality from EM Bonds to safe-haven US Treasury Securities: A time-frequency Analysis

We study 2001–2020 flight-to-quality episodes encompassing two planetary-scale crises: the Global Financial Crisis (GFC) of 2007–2008 and the coronavirus-triggered global meltdown. We focus on time-frequency lead-lag nexuses between holding emerging market (EM) debt and investing in relatively risk-free US Treasuries. Wavelet coherency along with the phase-difference approach is used. Our results reveal varying lead-lag patterns and low-coherence zones between EM bonds and US Treasuries, which imply the existence of appealing diversification attributes. The flights-to-quality during the crisis periods, such as the GFC and COVID-19 pandemic, emphasize the safe-haven characteristics of US Treasures. They also evidence that the post-Covid tightening of credit spreads to the pre-crisis levels is faster than the post-GFC recovery. We demonstrate that for EM debt investors, the US Treasury market allows for dynamic risk mitigation strategies during both global crises. © 2022 Taylor & Francis Group, LLC.

Return and volatility connectedness of the non-fungible tokens segments

Non-fungible tokens (NFTs) have garnered attention from investors and the general public. This pioneering study analyzes the connectedness of five NFT segments by employing the TVP-VAR based connectedness approach of Antonakakis et al. (2020) to identify the transmitter and receivers of spillover for both return and volatility of NFT segments. Our results show that Utility NFTs are the main transmitter of spillover, whereas the collectible NFTs are the main recipient of spillover for both return and volatility. Our findings have important implications for both investors and policy makers. (c) 2022 Elsevier B.V. All rights reserved.

Portfolio Diversification during the COVID-19 Pandemic: Do Vaccinations Matter?☆

The COVID-19 vaccine rollout expects to mitigate the severe negative impacts of the pandemic on global financial markets. Our study provides supporting evidence for this expectation. We find robust evidence that vaccinations significantly reduce the cross-country stock volatility connectedness among G7 nations, suggesting that the diversification benefits of an international equity portfolio may be enhanced during the pandemic when vaccinations accelerate. We present two explanations for this result. First, the vaccine deployment improves stock market return and decreases individual stock market volatility. Second, the vaccine rollout helps a country's stock market be more resilient to exogenous shocks. We further demonstrate that a global portfolio using a tactical allocation rule based on the intensity of vaccinations can outperform a buy-and-hold portfolio in terms of risk-adjusted returns.

Collusive behaviour, risk and performance of tourism firms

This paper aims to enrich social network and managerial powers theories by examining the effects of board-CEO friendship ties in tourism firms. Specifically, we focus on the association between the board-CEO social network ties (e.g. serving external boards together or sharing memberships at social organisations) and performance and risk-taking behaviour among tourism firms. The findings show that friendship ties between CEO and board members result in higher risk-taking, lower profitability and market values. In addition, professional ties (i.e. current and past employment) significantly impact tourism firms’ outcomes, whereas non-professional ties (i.e. education and other social organisations) do not. The findings prevail after controlling for the Covid-19 pandemic. However, friendship ties lead to better information sharing, resulting in more effective decision-making by board members. © The Author(s) 2022.

Dependence dynamics of stock markets during COVID-19

Stock markets have exhibited increased returns connectedness during the COVID-19 period. We examine the returns dependence among 42 stock markets classified under various emerging and developed groupings. We apply several dependence measures to examine the returns connectedness among the markets. Our results show that stock markets from the G-7 and Emerging Frontier and Asian (EFA) region exhibit high connectedness with other international markets, while Middle East and North African (MENA) and Latin American (LA) stock markets offer high diversification opportunities through low returns connectedness. The returns coherence of Central and East European (CEE) and G-7 markets increase significantly during the COVID-19 period which supports the hypothesis of contagion. However, during the pandemic MENA stock markets (excluding Greece) and most EFA markets (excluding China, Singapore and Korea) remain less cointegrated with other international equity markets. Our results have implications for individual and institutional investors, fund managers and other financial market stakeholders.

Flights-to-quality from EM Bonds to safe-haven US Treasury Securities: A time-frequency Analysis

We study 2001–2020 flight-to-quality episodes encompassing two planetary-scale crises: the Global Financial Crisis (GFC) of 2007–2008 and the coronavirus-triggered global meltdown. We focus on time-frequency lead-lag nexuses between holding emerging market (EM) debt and investing in relatively risk-free US Treasuries. Wavelet coherency along with the phase-difference approach is used. Our results reveal varying lead-lag patterns and low-coherence zones between EM bonds and US Treasuries, which imply the existence of appealing diversification attributes. The flights-to-quality during the crisis periods, such as the GFC and COVID-19 pandemic, emphasize the safe-haven characteristics of US Treasures. They also evidence that the post-Covid tightening of credit spreads to the pre-crisis levels is faster than the post-GFC recovery. We demonstrate that for EM debt investors, the US Treasury market allows for dynamic risk mitigation strategies during both global crises. © 2022 Taylor & Francis Group, LLC.

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.

Astonishing insights: emerging market debt spreads throughout the pandemic

We investigate how Covid-19 affects the emerging market (EM) bonds by analysing, on a standalone basis, investment grade (IG) and high yield (HY) debt per type of issuer. We document evidence that the option-adjusted spreads (OAS) of the IG and HY financials have recovered to the pre-Covid levels by the end of year 2020, while for the HY sovereigns and corporates the OAS remain twice as wide as before the pandemic. The weight of the liquidity component in the OAS for the IG sovereigns has climbed to astonishing 45%. Our results are potentially useful for investors, traders, risk managers and regulators.

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.