Does Heterogeneity in COVID-19 News Affect Asset Market? Monte-Carlo Simulation Based Wavelet Transform

Abstract

The current study investigates the connectedness between US COVID-19 news, Dowes Jones Index (DJI), green bonds, gold, and bitcoin prices for the period 22 January 2020–3 August 2021. The study has employed wavelet coherency, the continuous wavelet transform, and the wavelet-based Granger causality methods to obtain the dependence result. The continuous wavelet transform (CWT) analysis reveals that the United States equity market prices are extremely sensitive with regard to spreading coronavirus (USCOVID-19) news and changes in the oil price. Green bonds, gold, and bitcoin have minimal connectedness with the equity market, which might lead to the hedge and safe haven role of these assets during the COVID-19 crisis period. Lastly, very strong comovement was found between bitcoin and gold during the entire sample. The results of the present study offer a number of fresh and noticeable policy implications for international investors and asset managers.

Exploring the Driving Forces of Stock-Cryptocurrency Comovements during COVID-19 Pandemic: An Analysis Using Wavelet Coherence and Seemingly Unrelated Regression

“…The coherences between GFAs, including Bitcoin and stock yields, weaken in the medium and longer terms, except between the US Dollar and low yield stocks. Similar results are documented by [29], who investigated the connectedness between US COVID-19 news, Dow Jones Index (DJI), green bonds, gold, and bitcoin prices during the pandemic period from 22 January 2020 to 3 August 2021. Using a stretch of the Wavelet Coherence technique, ref.…”

“…The stock-Bitcoin coherence heatmaps corroborate the findings of [2,7] and [28] as they show the heat turns blue or even dark blue in some cases. The results indicate that Bitcoin can serve as a safe haven against the G7 stock markets during the pandemic [29], specifically for investors holding the cryptocurrency for a longer investment horizon. An exception is Italy, where Bitcoin appears as a strong hedger.…”

“…The results indicate that Bitcoin can serve as a safe haven against the G7 stock markets during the pandemic [29], specifically for investors holding the cryptocurrency for a longer investment horizon. An exception is Italy, where Bitcoin appears as a strong hedger.…”

“…Using a stretch of the Wavelet Coherence technique, ref. [29] revealed that green bonds, gold, and Bitcoin have minimal connectedness with the US equity market, indicating their role as hedgers and safe havens against the US stocks during the pandemic.…”

Changes in Consumption in the Early COVID-19 Era: Zip-Code Level Evidence from the U.S.

“…The economic implications of COVID-19 have been covered in several studies such as by Atkeson (2020b); Guerrieri et al (2020);and Eichenbaum et al (2020) based on macroeconomic consequences, in studies such as by Alfaro et al (2020); Baker et al (2020a); Anglin et al (2021) and Siddique et al (2021) based on financial markets, in studies such as by Alon et al (2020) or Dingel and Neiman (2020) based on labor markets, and in studies such as by Kuchler et al (2021); Atkeson (2020a); Jones et al (2020) or Chiou and Tucker (2020) based on social distancing and health. Within this literature, this paper belongs to the strand that focuses on the economic implications of COVID-19 on sector-level consumption and on online versus offline consumption.…”