The role of stock markets in the US, Europe, and China on oil prices before and after the COVID-19 announcement

ABSTRACT

This research investigates the asymmetric effects of the three major stock prices of the US, Europe, and China on WTI and Brent oil futures prices before and after the COVID-19 announcement by covering weekly data from January 2015 to April 2021. The results of the nonlinear autoregressive distributed lag (NARDL) model show that the US stock price has a significant positive effect in both models prior to the COVID-19 announcement but loses its effect on the WTI oil futures price after the COVID-19 announcement. Its impact on the Brent oil futures price remains after the COVID-19 announcement. The Europe stock price has a significant positive effect in all states. China stock price is not significant in the pre-COVID-19 period, but it has a significant effect after the COVID-19 announcement in both models. However, the only positive asymmetric changes in China stock price show a significant effect on the Brent oil futures price. Before COVID-19, the US stock price is the strongest, while the Europe stock price is the strongest after the COVID-19 announcement.