COVID-19 impact on commodity futures volatilities

Zhang, Yongmin; RuiZhi, Wang

doi:10.1016/j.frl.2021.102624

Cited by 25 publications

(17 citation statements)

References 13 publications

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“…irdly, different from prior papers that employed merely the worldwide pandemic cases [3,24,43,44], our econometric investigation covers both new cases of COVID-19 pandemic globally and in Europe. As well, contrary to prior papers that used the price of WTI crude oil [1-4, 7, 8, 24-26, 29, 33, 35, 39, 43, 45-56], Brent crude oil [4,7,8,15,24,26,36,37,43,44,46,47,49,51,52,[54][55][56], Dubai crude oil [4,8], NYMEX's oil [26,55,57], or carbon futures [14], the current study covers the daily returns of the Physical Electricity Index, Amsterdam Power Exchange Electricity Netherlands Average All Hours and, London Natural Gas Index United Kingdom Pence Per 100000 British ermal Units. Not least, different from prior papers focused on time-frequency connectedness [32,42,55,56,58], our quantitative framework covers several techniques such as GARCH estimation, autoregressive distributed lag (ARDL) models, as well as vector autoregressive (VAR) models.…”

Section: Introductionmentioning

confidence: 89%

“…Furthermore, concern for a worldwide recession has generated unavoidable systemic risks in the energy markets, exposing investors who own oil-derived securities to detrimental changes in crude prices [46]. e study by Zhang and Wang [57] demonstrated that the disease has increased long-term volatility for all future returns. Also, Shaikh [52] proved that through disease eruptions, the WTI crude oil market exhibited exceptional overreaction and dealt at an extremely volatile level.…”

Section: Background Literaturementioning

confidence: 99%

“…First, the Augmented Dickey-Fuller Unit Root (ADF) test will be used to verify the nonstationarity of our variables similar to Villarreal-Samaniego [2], Atri et al [3], Bildirici et al [8], Wu and Ma [9], Li et al [10], Wang et al [21], Wang et al [34], Geyikçi [41], Ahundjanov et al [43], Amamou and Bargaoui [49], Lin and Su [50], Zhang and Wang [57], Albulescu [66], Albulescu [67]. Specifically, nonstationary variables lead to inadequate results, which means insignificant results.…”

Section: Quantitative Analysis Strategymentioning

confidence: 99%

“…Due to the pandemic news outburst, the market typically encounters an unstable phase prior to returning to regularity [52]. In order to explore the volatility of the selected series, the GARCH (p, q) model will be considered alike [4], Szczygielski et al [5], Wu and Ma [9], Maneejuk et al [44], Iglesias and Rivera-Alonso [51], Zhang and Wang [57], which shows the following general form:…”

Section: Quantitative Analysis Strategymentioning

confidence: 99%

See 3 more Smart Citations

How Energy Sector Reacted to COVID‐19 Pandemic? Empirical Evidence from an Emerging Market Economy

Armeanu

Joldeș

Gherghina

2022

Discrete Dynamics in Nature and Society

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The European Union is facing the highest natural gas prices in 15 years, owing largely to an upward trend in electricity prices, which is also on an uphill curve. However, the rise in electricity and natural gas prices is a widespread phenomenon that is being felt not only in Europe but also globally, as economic activity resumes and energy consumption returns to prepandemic levels. Consequently, this paper investigates how COVID-19 influenced the Romanian energy market. To accomplish our goal, we used daily data for variables and market indices that characterize COVID-19 and the energy market from July 1 to December 21, 2021. The results of the GARCH (1, 1) model estimation show that the major performer in Romania’s energy allocation and supply market had the highest conditional variance. In addition, the ARDL model was chosen because of the variable integration mix (order 0 and 1), as well as the VAR and the Granger causality framework. The empirical results of ARDL models provide the first conclusion of the analysis, indicating that the number of short-term connections was greater than long-term connections, which is also explained by the presence of short episodes of high volatility recorded in the investigated time interval. Another conclusion drawn from this study is that COVID-19 cases registered in Europe and around the world have made a significant contribution to explaining the evolution of the energy market, owing to the large number of cases registered in these regions and the level of contagion transmitted from these markets to the energy market. Furthermore, based on the Granger causality test results, only one-way causal relationships were identified from the variables that capture the evolution of the COVID-9 pandemic to the yields of Romanian energy companies. The novelty of this article is the examination of the impact of COVID-19 on the energy market throughout the fourth wave of coronavirus using the GARCH framework, the ARDL model, which allows for the capture of both short- and long-term reactions, the variance decomposition, and the Granger causality test. Because of the ongoing changes in the pandemic’s evolution, additional research on this topic is undoubtedly on the horizon in the near future.

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Section: Introductionmentioning

confidence: 89%

Section: Background Literaturementioning

confidence: 99%

Section: Quantitative Analysis Strategymentioning

confidence: 99%

Section: Quantitative Analysis Strategymentioning

confidence: 99%

See 2 more Smart Citations

How Energy Sector Reacted to COVID‐19 Pandemic? Empirical Evidence from an Emerging Market Economy

Armeanu

Joldeș

Gherghina

2022

Discrete Dynamics in Nature and Society

View full text Add to dashboard Cite

show abstract

“…Second, international oil markets are vital to financial and economic stability worldwide, as numerous studies indicate that oil prices have a strong linkage to international stock markets (Ghosh & Kanjilal, 2016 ), to other commodity prices (Sun et al, 2021 ) and economic factors, such as GDP and interest rates (Lian et al, 2020 ; Urom et al, 2021 ). Finally, the COVID‐19 pandemic is a dramatic public crisis that has affected almost all aspects of the worldwide economy and commodity price volatilities (Zhang & Wang, 2021 ), especially oil futures prices, which move in an extremely volatile way. Therefore, investigation of the impacts of COVID‐19 on US and Chinese oil futures markets' return and volatility spillover effects is important to understand the effect the pandemic had on the world economy.…”

Section: Introductionmentioning

confidence: 99%

The impact of COVID‐19 on the interdependence between US and Chinese oil futures markets

Zhang

Ding

Shi

2022

Journal of Futures Markets

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The oil futures market plays a vital role in the global financial system, especially after the negative future oil price rose during the COVID‐19 pandemic. This paper investigates the COVID‐19 impact on the interdependence between the US and Chinese oil futures markets by extending the dynamic conditional correlation‐generalized autoregressive conditional heteroskedasticity (DCC‐GARCH) models with incorporating COVID‐19 variables and by applying vector autoregression (VAR) models. Our study reveals that the COVID‐19 pandemic enhanced the long‐run correlation between the two oil markets. In contrast, daily changes in pandemic severity had a negative effect on the short‐term transient correlation. Our results show that COVID‐19 changed the one‐direction causality from the US oil market to the Chinese market in the pre‐COVID period to a bidirectional causal relation between the two markets during the COVID period. It strengthened the volatility spillover effect from the Chinese to US markets. These findings are helpful to regulars' monitoring oil supply chain risk and investors' cross‐market hedging of spillover risks from a systematic risk perspective.

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COVID‐19 and tail risk contagion across commodity futures markets

Qiao

Han

2022

Journal of Futures Markets

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This paper examines the impact of COVID-19 on tail risk contagion across commodity futures markets using a copula-based network method. We document a significant increase in the lower and upper tail contagiousness of commodities following the COVID-19 outbreak. Contagion shows an obvious clustering characteristic, that is, there is higher tail risk connectedness between commodities in the same category. Agricultural commodities are significantly less contagious than metals and energy commodities; soft commodities in particular can offer investors significant diversification benefits. There are several hub commodities in the contagion network, chief among them copper, which are good transmitters of shocks and should be treated with caution by investors and regulators. Although tail risk and contagiousness of individual commodities increase together during the pandemic, we find a negative cross-sectional relationship between tail risk and contagiousness, that is, commodities with high tail risk are not necessarily highly contagious and may even be less so.

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COVID-19 impact on commodity futures volatilities

Cited by 25 publications

References 13 publications

How Energy Sector Reacted to COVID‐19 Pandemic? Empirical Evidence from an Emerging Market Economy

How Energy Sector Reacted to COVID‐19 Pandemic? Empirical Evidence from an Emerging Market Economy

The impact of COVID‐19 on the interdependence between US and Chinese oil futures markets

COVID‐19 and tail risk contagion across commodity futures markets

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