The Protective Nature of Gold During Times of Oil Price Volatility: An Analysis of the COVID-19 Pandemic.

This research explores gold's safe-haven properties amid oil price instability, focusing on the COVID-19 pandemic. The study examines how gold hedges against oil price swings in the context of the pandemic's exceptional market circumstances. A VAR (Vector Autoregressive) model analyzes gold and oil prices from 2006 through 2021. The VAR model reflects the dynamic interactions and interdependencies between these two essential commodities in the context of oil price volatility and the COVID-19 pandemic. This analysis shows that gold protects against oil price volatility and the COVID-19 pandemic-gold buffers against oil price swings due to its strong inverse association with oil prices. Gold offers investors security and asset preservation during significant oil price volatility. In light of oil price volatility and the COVID-19 pandemic, the study helps explain gold's importance as a diversification tool and haven asset. Investors, policymakers, and market players should consider gold as a hedge against oil price volatility and economic instability.

An impact assessment of the COVID-19 pandemic on Japanese and US hotel stocks.

This study proposes two new regime-switching volatility models to empirically analyze the impact of the COVID-19 pandemic on hotel stock prices in Japan compared with the US, taking into account the role of stock markets. The first model is a direct impact model of COVID-19 on hotel stock prices; the analysis finds that infection speed negatively affects Japanese hotel stock prices and shows that the regime continues to switch to high volatility in prices due to COVID-19 until September 2021, unlike US stock prices. The second model is a hybrid model with COVID-19 and stock market impacts on the hotel stock prices, which can remove the market impacts on regime-switching volatility; this analysis demonstrates that COVID-19 negatively affects hotel stock prices regardless of whether they are in Japan or the US. We also observe a transition to a high-volatility regime in hotel stock prices due to COVID-19 until around summer 2021 in both Japan and the US. These results suggest that COVID-19 is likely to affect hotel stock prices in general, except for the influence of the stock market. Considering the market influence, COVID-19 directly and/or indirectly affects Japanese hotel stocks through the Japanese stock market, and US hotel stocks have limited impacts from COVID-19 owing to the offset between the influence on hotel stocks and no effect on the stock market. Based on the results, investors and portfolio managers should be aware that the impact of COVID-19 on hotel stock returns depends on the balance between the direct and indirect effects, and varies from country to country and region to region.

Price Volatility Modeling for the Lumber Futures Market: A Generalized Autoregressive Conditional Heteroskedasticity-Mixed Data Sampling Approach

Lumber is one of the most essential forest products in the United States. During the first year of the COVID-19 pandemic, lumber prices almost quadrupled, and fluctuations reached record levels. Although market experts have pointed to various drivers of such high price volatility, no firm conclusions have been drawn yet. Using the generalized autoregressive conditional heteroskedasticity-mixed data sampling (GARCH-MIDAS) framework, this study assesses the potential drivers of lumber price volatility, with predictors including the Google Trends Web Search Index, housing starts, US lumber production quantity, and VIX index, representing public attention, housing demand, lumber supply, and macroeconomic concerns, respectively. We have found that housing demand is the key driver of lumber price volatility, followed by public attention. It is worth noting that US lumber supply and macroeconomic concerns have played a modest role in explaining lumber price volatility. Also, forecasting lumber price by using the housing demand variable substantially outperforms others. Market participants, including lumber mills, wholesalers, and home builders can get valuable information from the housing market to manage lumber price risk.Study Implications: The findings of this study can be used to improve hedging strategies, design option pricing formulas, and setting margin requirements. Critical information for price risk management on the lumber market can be gained by lumber market participants from the housing market. For forest management decisions by landowners, giving close attention to housing market would provide valuable information on the appropriate time for timber harvesting, because changes in the housing market affect lumber price that will indirectly affect the demand for timber, which is the most important factor of production for lumber mills.

Pass-through Effects of Oil Prices on LATAM Emerging Stocks before and during COVID-19: An Evidence from a Wavelet-VAR Analysis

Vector Auto regression model (VAR) a time-varying parameter is applied to study the effect of oil price shocks on the returns of stocks in the LATAM (Latin American) markets. Coherent Wavelet analysis highlights possibilities of connectedness of the oil price and LATAM stock markets through the presence of different patterns in a time series. The structural demand shocks standard deviations during the COVID-19 era remain high and the pass-through effects on stock returns due to oil prices differ for different time frames. The fundamental linkages are demonstrated due to oil market specific demand. The main motive of the research work is to identify the influence of oil price on stocks and identify the fundamental source of contagion.A random effects model is applied to the panel data of LATAM markets with the Global stock market index, MSCI (Morgan Stanley Capital International World Index), domestic money market rates and currency exchange rates during the period of study, 15 March 2019 to 31 July 2021 with 684 observations of controlled non-observed characteristics from individual country. The findings of this research recommend the pass-through effect of the oil prices on the stock market returns are based on time frequency. The contribution of this paper helps the policy makers to restore the confidence amongst the investors in the stock markets and strategies to be adopted by the investors to mitigate the risk by ideal portfolio management. © 2023, Econjournals. All rights reserved.

Green metal price volatility and environmentally sustainable real estate development nexus: A global perspective from post COVID-19 pandemic

This study examined the relationship between green metal price shocks and green real estate development using the Structural Vector Autoregressive (SVAR) model. Real-time daily dataset for the study covers the period from January 4, 2021, to December 30, 2022. The findings are presented using two methods: cumulative impulse responses and variance decompositions. The cumulative impulse responses show how structural shocks affect the volatility of green real estate over time. The variance decompositions show the percentage of the variation in green real estate volatility that is caused by each structural shock. The results showed that green real estate development responded negatively to green metal shocks for at least half of the observed period, and the energy price, specifically oil, had a greater and more persistent negative impact. This suggests that changes in oil prices may continue to have a significant influence on the development of green real estate projects and the broader transition towards environmentally sustainable practices in the construction industry. The explained variable, on the other hand, had a positive response to shocks associated with green finance in the latter part of the observed period. Policy and practical implications of the findings have also been discussed. © 2023

Government Interventions and Sovereign Bond Market Volatility during COVID-19: A Quantile Analysis

We test the interaction between governments' COVID-19 interventions, COVID-19-induced uncertainty, and the volatility of sovereign bonds. Different from previous literature, we investigate the asymmetric response of bond market volatility to both governmental interventions and COVID-19-induced uncertainty. With a focus on the first waves of the pandemic and using a panel quantile approach and a comprehensive dataset of 31 countries worldwide, we document that containment and closure policies tend to amplify volatility. Furthermore, the price variability is augmented by the spread of the pandemic itself. On the contrary, economic support policies have a substantial stabilizing effect on bond price fluctuations. Both phenomena are not subsumed by additional control variables and are robust to multiple considerations. Our findings may serve financial market participants in their risk management decisions, as well as policymakers to better shape their preparedness for future pandemics. © 2023 by the authors.

Forecasting the volatility of precious metals prices with global economic policy uncertainty in pre and during the COVID-19 period: Novel evidence from the GARCH-MIDAS approach

Economic policy is a major determinant of investment and financial decisions;Moreover, prices of precious metals are highly influenced by any uncertainty recorded in the global economic policy. Therefore, the prime consideration of the authors is to assess how global economic policy uncertainty influences the volatility of precious metals prices;particularly "gold, palladium, platinum, and silver” in the pre and during the COVID-19 pandemic. This research analyzed the full sample period (the 1997–2022), pre-COVID period (1997–2019), and during the COVID period (2020−2022) to evaluate the impact during different sample periods. Therefore, the GARCH-MIDAS approach is employed at the data set of different frequencies, i.e., monthly data of GEPU and daily data of precious metals. The results reveal a significant nexus between global GEPU and precious metals price volatility. The findings infer that any uncertainty recorded in global economic policy escalate the price volatility of gold, palladium, platinum, and silver prices. The present study increments the existing literature and provides insights for future scholars, investors, and policymakers. © 2023 Elsevier B.V.

On the volatility of WTI crude oil prices: A time-varying approach with stochastic volatility

This study investigates the impacts of crude oil-market-specific fundamental factors and financial indicators on the realized volatility of West Texas Intermediate (WTI) crude oil price. A time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV) is applied to weekly data series spanning January 2008 to October 2021. It is found that the WTI oil price volatility responds positively to a shock in oil production, oil inventories, the US dollar index, and VIX but negatively to a shock in the US economic activity. The response to the EPU index was initially positive and then turned slightly negative before fading away. The VIX index has the most significant effect. Furthermore, the time-varying nature of the response of the WTI realized oil price volatility is evident. Extreme effects materialize during economic recessions and crises, especially during the COVID-19 pandemic. The findings can improve our understanding of the time-varying nature and determinants of WTI oil price volatility. © 2022

Do oil, gold and metallic price volatilities prove gold as a safe haven during COVID-19 pandemic? Novel evidence from COVID-19 data.

The spreading COVID-19 outbreak has wreaked havoc on the world's financial system that raises an urgent need for the re-evaluation of the gold as safe haven for their money because of the unprecedented challenges faced by markets during this period. Therefore, the current study investigates whether different asset class volatility indices affect desirability of gold as a safe-haven commodity during COVID-19 pandemic. Long run and the short run relationship of gold prices with gold price volatility, oil price volatility, silver price volatility and COVID-19 (measured by the number of deaths due to COVID) has been analyzed in the current study by applying ARDL Bound testing cointegration and non linear ARDL approach on daily time series data ranging from January 2020 to Dec 2021. Findings of the study suggest that in the long run, oil price volatility and gold price volatility positively affect the gold prices, whereas the effect of silver price volatility on gold prices is negative in the long run. However in the short run, all the three indices negatively impact the gold prices. In contrast, the impact of COVID-19 is positive both in the short run and in the long run that proves the validity of gold as safe haven asset in the time of the deadly pandemic. The findings of this study have significant implications and offer investors with some indications to hedge their investments by considering the gold's ability of safe haven during this era of pandemic.

COVID-19 and the Mystery of Lumber Price Movements

The COVID-19 pandemic led to unprecedented changes in the U.S. price of softwood lumber by more than 300% between 2020 and 2022. The increased volatility of lumber prices after the COVID-19 outbreak remains unexplained. In this paper, we examine how a calibrated random walk can induce similar price volatility through the development of a stochastic process. As a preferred approach, we employ an event model to estimate the impact of COVID-19 and other key events on the price of softwood lumber. The econometric model serves to provide evidence that the price volatility of softwood lumber is not completely random, and we can instead attribute part of the variation to recent regional and global events. We found that, while COVID-19 did result in a price jump, it was smaller than a rainfall event that restricted imports from Canada, while import duties and other trade actions had no discernible impact on U.S. lumber prices.

The impacts of oil price volatility on financial stress: Is the COVID-19 period different?

This study analyses the effects of oil price volatility on financial stress with various measures for a large panel of countries. The study places a special focus on comparing the pattern of these effects during the Great Recession period and the COVID-19 recession period. Using the local projection approach, the paper finds that oil price volatility has a positive and persistent effect on financial stress. However, the magnitude and the degree of persistency of oil price volatility impacts on financial stress are much greater for the Great Recession period than for the COVID-19 recession period. A possible explanation for this result would be that COVID-19 is better thought of as a "natural disaster” in which companies under stress were not being mismanaged. Another explanation would be that active intervention by the government through monetary and fiscal channels reduces the sensitivity of financial instability to oil price volatility during the COVID-19 period.

Corporate ESG performance as good insurance in times of crisis: lessons from US stock market during COVID-19 pandemic

Purpose: The COVID-19 outbreak and its confinement resulted in an unexpected stock market crash, hence the interest in environmental, social and governance (hereafter, ESG) policies. This paper aims to examine the association between ESG performance and stock market volatility before and after the COVID-19 pandemic. Design/methodology/approach: This paper examined 500 US companies listed in the S&P 500. The window period volatility refers to March 18, 2020, when the US President signed into law the Families First Coronavirus Response Act. Here, the Thomson Reuters database was used to collect ESG data and daily market information. Findings: The findings suggest that companies with high ESG performance have lower stock price volatility than companies with poor ESG performance. In other words, strong ESG performance reduces stock price volatility resulting from the COVID-19 shock and promotes resilience and stock price stability. Practical implications: This research contributes to current debates on emerging pandemics and unexpected risks and highlights the need to invest more in improving corporate sustainability. Originality/value: The results have substantial implications for managers and investors, as it highlights the relevance of customer and investor loyalty to the durability of ESG stocks. © 2023, Emerald Publishing Limited.

Assessing oil price volatility co-movement with stock market volatility through quantile regression approach

In times of financial crisis as well as during the COVID-19 era, gold and crude oil are the two commodities that have the most influence on global stock markets and the real economy. But research has mostly focused on the effects of these commodities' prices on their own, and the volatility of these commodities' prices as a whole hasn't gotten much attention. This research paper evaluates the impacts of crude oil prices volatility on shares marketplaces. This research examines the impact of crude oil uncertainty on the overall market returns in several economic sectors (China, Japan, the USA, France, and Germany) between 2000 and 2020 using the importance of the crude oil prices volatility index by applying a Quantile-on-Quantile regression(Q-Q), including dynamic copula with Markov-Switching. The results depict that because the effect of the OVX changes crosswise every single quantile level of stock return, it is cumbersome to ascertain the changes within the adverse impacts under varied stock market circumstances. Equally, to derive a comprehensive understanding of the correlation between crude costs volatility and stock returns, we utilize twofold quantile regression and quantile-quantile regression methods. We interpret these different features' impacts by applying the quantile regression approximates. Our experiential findings show that crude costs uncertainty has lop-sided impacts on stock returns;more so, these disproportionate performances alternate based not merely on the level of shares returns nonetheless equally crude market circumstances. More so, greater values match a robust risk decrease. Further, we observed heterogenous hedging effectiveness among the varied United States stock sectors. The findings demonstrate that growing crude prices volatility obtains an adverse impact on stock returns when the dual crude costs volatility and stock returns are minimal. Nevertheless, when shares returns are greater plus crude prices, volatility is minimal;growing crude volatility increases stock returns.

Explaining Post-Pandemic Lumber Price Volatility and its Welfare Effects

The COVID-19 pandemic led to an unprecedented increase in the U.S. price of softwood lumber by more than 300%. The price increase has been attributed to constraints on supply and increased demand for lumber caused by a pandemic-induced boom in domestic housing construction and, more so, home improvements. However, the volatility in lumber prices after the COVID-19 outbreak remains unexplained. In this paper, we employ a theoretical model to explain the cause of price volatility. We examine why demand and supply functions for lumber might be quite inelastic over the period from March 2020 to April 2022, despite very small shifts in demand. This implies that slight movements in interest rates or changes in the prices of substitutes, for example, can lead to large jumps in prices. Price volatility harms consumers while greatly benefitting lumber producers. Overall, as a result of the pandemic, U.S. producers gained some $5.3 billion, while U.S. consumers lost $7.3 billion per quarter. © 2022 Walter de Gruyter GmbH, Berlin/Boston.

On the volatility of WTI crude oil prices: A time-varying approach with stochastic volatility

This study investigates the impacts of crude oil-market-specific fundamental factors and financial indicators on the realized volatility of West Texas Intermediate (WTI) crude oil price. A time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV) is applied to weekly data series spanning January 2008 to October 2021. It is found that the WTI oil price volatility responds positively to a shock in oil production, oil inventories, the US dollar index, and VIX but negatively to a shock in the US economic activity. The response to the EPU index was initially positive and then turned slightly negative before fading away. The VIX index has the most significant effect. Furthermore, the time-varying nature of the response of the WTI realized oil price volatility is evident. Extreme effects materialize during economic recessions and crises, especially during the COVID-19 pandemic. The findings can improve our understanding of the time-varying nature and determinants of WTI oil price volatility.

Role of oil price volatility, energy efficiency, and financial stability on sustainable energy production

In the COVID-19 crisis, many economies suffered from sustainable energy production. The emergence of the COVID-19 crises, extreme volatility in oil prices, limited energy efficiency in energy systems, and weak form of financial stability were the key reasons for it. However, considering these issues, a recent study aims to analyze them. ASEAN countries' energy efficiency and crude oil price volatility are examined as a solution to how financial conditions might be utilized to handle energy efficiency issues and crude oil price volatility. Extending it, the study aims to identify the influence of financial stability on crude oil price volatility and energy efficiency issues. To do this, GMM is used. According to the study's findings, environmental mitigation was determined to be important at 18%, and financial stability and carbon risk significant at 21%. Global warming concerns have been raised due to the ASEAN nations' 19.5% link between financial stability and emissions drift. A country's financial stability is necessary for implementing green economic recovery strategies, among the most widely accepted measures to reduce energy efficiency and guarantee long-term financial potential on the national scale. The study on green economic growth also provides the associated stakeholders with sensible policy consequences on this importance.

Testing the fluctuations of oil resource price volatility: A hurdle for economic recovery

The influence of oil price volatility on significant international macroeconomic indicators is examined empirically. The vector auto-regression (VAR) system is used to examine the influence of oil price volatility. According to the Granger causality test, impulse response functions, and variance decomposition, economic recovery and investment have been significantly affected by oil price volatility from 2000Q1 to 2020Q4. According to this research, business investment and oil prices have shown great power throughout the international economic meltdown. Volatility in economic activity and oil prices are expected during this crisis, according to the recent COVID-19 outbreak. Furthermore, in the international financial crisis and COVID-19 crises, oil prices and economic growth are strongly linked. We propose that the COVID-19 epidemic and the global financial problems have major effects on economic activity when oil prices fall. The COVID-19 epidemic had the greatest total connectedness between oil prices and economic activities, which suggests that the speed of information propagation between the oil market and financial initiatives was greater during the COVID-19 outbreak than during past global financial crises. There are important consequences for policymakers based on the findings of this research.

Corporate governance and stock performance: The case of COVID-19 crisis

This paper analyzes the impact of COVID-19 on firm-level stock behaviors (including stock price volatility, trading volume and stock returns). Using US data, this paper examines whether confirmed cases (and deaths) of COVID-19 or COVID-19-associated online searches affect stock behaviors. The results show that our five COVID-19 proxies are all positively associated with stock price volatility and trading volume and negatively associ-ated with stock returns. This paper further investigates the mitigating effect of corporate governance (viz., board and ownership structures) in this COVID-19 crisis. Overall, the results suggest that good corporate governance can mitigate the impact of COVID-19 on stock price volatility and trading volume but may not help to enhance stock returns. This paper also considers key policies used to tackle the COVID-19 pandemic and finds that government intervention plays an important role in stabilizing stock markets in this COVID-19 crisis. (c) 2021 Elsevier Inc. All rights reserved.

Oil tail-risk forecasts: from financial crisis to COVID-19

The coronavirus outbreak has caused unprecedented volatility in oil prices. This paper extends previous studies on oil Value-at-Risk (VaR) by providing extra insights into Expected Shortfall (ES) forecasting over the last decade, including several oil crises. We introduce a conditional volatility model combined with the Cornish-Fisher expansion for ES forecasting. In comparison to the widely used volatility models and innovation distributions, this approach is superior for predicting the ES of long positions but overestimates VaR for short positions. Overall, the volatility model addressing leverage effects with skewed t innovation produces the most accurate joint VaR and ES forecasting. Moreover, the magnitude of ES relative to VaR varies across models and time, implying that ES should be used in conjunction with VaR to inform timely risk management decisions. The results would be of interest to the regulatory authorities, energy companies, and financial institutions for oil tail-risk forecasting.

Feverish sentiment, lockdown stringency, oil volatility, and clean energy stocks during COVID-19 pandemic

Purpose - This study seeks to investigate role of the coronavirus disease 2019 (COVID-19) pandemic on clean energy stocks for the United States for the period 21 January 2020-16 August 2021. Design/methodology/approach - At the empirical stage, the Fourier-augmented vector autoregression approach has been used. Findings - According to the empirical results, the response of the clean energy stocks to the feverish sentiment, lockdown stringency, oil volatility, dirty assets, and monetary policy dies out within a short period of time. In addition, the authors find that there is a unidirectional causality from the feverish sentiment index and the lockdown stringency index to the clean energy stock returns;and from the monetary policy to the clean energy stocks. At the same time, there is a bidirectional causality between the lockdown stringency index and the feverish sentiment index. The empirical findings can be helpful to both practitioners and policy-makers. Originality/value - Among the COVID-19 variables used in this study is a new feverish sentiment index, which has been constructed using principal component analysis. The importance of the feverish sentiment index is that it allows us to examine the impact of the aggregate level of fear in the economy on clean energy stocks.