Crude oil and stock markets in the COVID-19 crisis: Evidence from oil exporters and importers

Heinlein, Reinhold; Legrenzi, Gabriella; Mahadeo, Scott M. R.

doi:10.1016/j.qref.2021.09.007

Cited by 36 publications

(13 citation statements)

References 43 publications

(46 reference statements)

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“…However, these studies above did not investigate whether the correlation between clean energy and fossil fuels became any stronger during the pandemic. Moreover, Heinlein et al [31] applied the multiplicative component GARCH model to investigate how the relationship between crude oil and stock markets, suggesting that there are correlations between the crude oil and stock markets for all countries during the COVID-19 crisis. The authors also indicate that the stock markets of commodity exporters have stronger correlations with oil returns than their importing counterparts.…”

Section: Previous Researchmentioning

confidence: 99%

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

Tang

Aruga

2021

Sustainability

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This study examined how the relationships among the fossil fuel, clean energy stock, gold, and Bitcoin markets have changed since the COVID-19 pandemic took place for hedging the price change risks in the fossil fuel markets. We applied the Bayesian Dynamic Conditional Correlation-Multivariate GARCH (DCC-MGARCH) models using US daily data from 2 January 2019 to 26 February 2021. Our results suggest that the fossil fuel (WTI crude oil and natural gas) and financial markets (clean energy stock, gold, and Bitcoin) generally had negative relationships in 2019 before the pandemic prevailed, but they became positive for a while in mid-2020, alternating between positive (0.8) and negative values (−0.8). As it is known that negative relationships are required among assets to hedge the risk of price changes, this implies that stakeholders need to be cautious in hedging the risk across the fossil fuel and financial markets when a crisis like COVID-19 occurs. However, our study also revealed that such negative relationships only lasted for three to six months, suggesting that the effects of the pandemic were short term and that stakeholders in the fossil fuel markets could cross hedge with the financial markets in the long term.

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Section: Previous Researchmentioning

confidence: 99%

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

Tang

Aruga

2021

Sustainability

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“…2.2.2. Evidence from specific economic sectors and disaggregated equities Instead of a focus of the relationship between crude oil market shocks and the headline stock market index in multiple countries (see, inter alia, Jones and Kaul 1996, Filis et al 2011, Kang and Ratti 2013, Kang et al 2015b, Boldanov et al 2016, Antonakakis et al 2017, Heinlein et al 2021, another strand of the literature examines the impact of oil price shocks on sector equities and certain sectors of the economy. With specific reference to the Canadian housing market, Kilian and Zhou (2021) demonstrate that oil price shocks raise real estate demand and real house prices not only in oil-rich provinces but in oil-poor regions as well.…”

Section: Evidence From the Canadian Economy And Equitiesmentioning

confidence: 99%

Oil and US stock market shocks: Implications for Canadian equities

Heinlein

Mahadeo

2023

Canadian J of Economics

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Oil and US stock market shocks are relevant to Canadian equities because Canada is an oil exporter exposed to market developments in the wider continent. We evaluate how the relationship between Canadian stock market indices and such external shocks change under extraordinary events. To do this, we subject statistically identified oil and S&P 500 market shocks to a surprise filter, which detects shocks with the greatest magnitude occurring over a given lookback period, and an outlier filter, which detects extrema shocks that exceed a normal range. Then, we examine how the dependence structure between shocks and Canadian equities change under the extreme surprise and outlier episodes through various co‐moment spillover tests. Our results show co‐moments beyond correlation are important in reflecting the changes occurring in the relationships between external shocks and Canadian equities in extreme events. Additionally, the differences in findings under extreme positive and negative shocks provide evidence for asymmetric spillover effects from the oil and US stock markets to Canadian equities. Moreover, the observed heterogeneity in the relationships between disaggregated Canadian equities and shocks in the crude oil and S&P 500 markets are useful to policy‐makers for revealing sector‐specific vulnerabilities and provide portfolio diversification opportunities for investors to exploit.

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“…This association also means that crude oil prices may evaluate oil stock price in the coming days, given to the study.. (Ikram et al 2019 ) The study discovers strong co-movements at low frequencies, increasing this interconnection following the great recession. Similarly, (Yu et al 2020 ; Heinlein et al 2021 ) Evaluate the relative relationship in-between oil and stocks in the U. S, Japan, and German countries on spillovers, short-term return between oil and stock markets, and also long-term market volatility, which was particularly evident during in the Global Depression.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Several publicly traded corporations have lost more than a third of their value in just these few weeks, and oil prices have dropped to their lowest levels in a decade. The Covid-19 pandemic has sparked widespread fear (Ahmad et al 2022 ; Irfan et al 2022a ), and the impact on the energy and stock markets has been extraordinary (Wen et al 2019 ; Jiang and Yoon 2020 ; Yu et al 2020 ; Heinlein et al 2021 ). Specifically, In comparison to the global financial disaster of 2008, it appears that the impact of the ongoing Covid-19 pandemic disaster is rather systematic (Yang et al 2021 ; Wen et al 2022 ), as all asset classes are impacted (Iqbal et al 2021 ; Irfan et al 2021e ), and shocks are widely transmitted across markets (Dong and Hao 2018 ; Ahmad et al 2021 ).…”

Section: Introductionmentioning

confidence: 99%

Determining the COVID-19 effects on spillover between oil market and stock exchange: a global perspective analysis

Yan

Cao

Gao

2022

Environ Sci Pollut Res

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This paper investigates volatility spillovers between the global crude oil market and the stock markets of the global oil stock markets (Russian, Canada, China, Kuwait, and the USA) pre and after the COVID-19 pandemic. We use wavelet Granger causality methods to study the volatility spillovers between global oil stock markets, mainly from January 1, 2019, to March 31, 2021. Our Results (1) shows that WTI and Brent oil prices had a negative mean return before COVID-19 but a positive mean return during the pandemic spread. Other Results (2) find the positive, significantly lowest, and highest frequency during the COVID-19 outbreak for all selected countries. The results also show that the link between oil WTI & Brent prices and stock markets return in the lowest (33-66 days) and highest frequency range (4-16) before the Covid-19 epidemic, especially in the first quarter of 2020. Before the COVID-19 period, the Russian oil stock market is seriously prejudiced with oil prices on a modest scale, but not after the pandemic's start. This study also perceives direction opposite between the COVID-19 period. The Canadian and United States America oil and stock markets influence the lowest scale in the previous COVID-19 sample for the U.S. market. Moreover, this paper exposed that oil marketing highest oil futures in their portfolios than stock shares for all times. We found that oil price shocks had a more significant impact on the stock markets of the United States and Canada than on the stock markets of other countries.

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Crude oil and stock markets in the COVID-19 crisis: Evidence from oil exporters and importers

Cited by 36 publications

References 43 publications

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

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

Oil and US stock market shocks: Implications for Canadian equities

Determining the COVID-19 effects on spillover between oil market and stock exchange: a global perspective analysis

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