Dynamic spillovers between energy and stock markets and their implications in the context of COVID-19

Relationships among the Fossil Fuel and Financial Markets during the COVID-19 Pandemic: Evidence from Bayesian DCC-MGARCH Models

“…This implies that the conditional correlations between fossil fuels and their hedging asset price returns are time-varying during the pandemic period. This confirms the result of Zhang et al [8] revealing that the linkage between energy and the stock market is dynamic in the context of COVID-19. We also confirm that the WTI oil and natural gas nexus with their hedging assets tend to have a stronger negative correlation before the pandemic and a Figure 5b shows the DCC-conditional correlations between fossil fuels and gold.…”

“…This might indicate that crude oil and natural gas have a stronger negative correlation with these markets before the pandemic because diversification works best when the assets are negatively correlated with one another, such that, as some parts of the portfolio fall, others rise. However, during the early days of the pandemic, crude oil and natural gas in the US suffered from negative influences related to COVID-19 ([49,50]), as did the IWHCE [8], gold, and Bitcoin markets [3]. This means that, when a pandemic occurs, investors may panic and simultaneously sell crude oil, natural gas, IWHCE, and other relatively risky assets to buy relatively low-risk or low-correlation assets such as bonds.…”

“…The investors began to panic and sold their financial assets [7], which further depreciated the prices of those financial assets. Thus, it is probable that both the fossil fuel and financial asset markets were adversely affected by the pandemic [8], and as a result, both markets formed a positive, correlative relationship. Hence, we expect their relationship changed before and after the crisis.…”

The correlations among COVID-19, the effect of public opinion, and the systemic risks of China’s financial industries

“…Third, from the perspective of spillover, some scholars believe that the COVID-19 will exacerbate the spillover of systemic risks. Zhang et al [14] find that the COVID-19 has a significant impact on the spillover effect of the stock market, and the overall spillover index after the outbreak has increased significantly compared to before the epidemic. Based on the DCC-GARCH model, Abuzayed et al [15] calculate between the stock market index and individual stock index of 14 countries most affected by the epidemic and find that during the epidemic, the risk spillover between the global market and individual stock markets has significantly increased and the two-way contagion.…”

Modeling long-term impacts of the COVID-19 pandemic and oil price declines on Gulf oil economies

“…The oil price changes have also had a direct impact on GCC states. Moreover, the energy market has been an important risk recipient of the various spillover effects of the pandemic, including risk of the stock market ( Alqahtani et al., 2021 ; Zhang et al., 2021 ). Specifically, the stock markets in the G20 economies, which include Saudi Arabia as well as other petrostates like Russia and Mexico, have become more responsive to oil price changes during this period.…”