The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?

Abstract

This study examines the effect of COVID-19 pandemic on the efficiency of oil markets from 2nd February 2020 to 4th August 2021. By relying on dynamic conditional correlation GARCH and Wavelet coherence techniques, we able to provide correlations between the variables across time and frequency domains. Our empirical findings point to significant yet weak correlations between COVID-19 recovery/death rates for the time period extending from early February to early May even though we observe strong correlations between WTI prices and COVID-19 health statistics in mid-April. Moreover, during this identified time period, the length of frequency cycles within the correlations decreases from 16 days to 8 days. Altogether, these findings imply that oil markets were inefficient between February and early May and have since turned market efficient for the remaining duration of the pandemic.

Commodity Market Efficiency: New Evidence From the Russia-Ukraine War

“…EMH can be in the weak-form efficiency, where asset prices adjust to historical information or past trends; the semi-strong form efficiency, in which asset prices adjust to publicly available information; or the strong form efficiency where insider information is already reflected in asset prices, making it practically impossible to beat the market (Fama, 1970). However, crises such as the Global Financial crisis, European sovereign debt crisis, Brexit, and Covid-19 pandemic, present trend price deviation and unexpected investor behaviour, particularly market participants with active portfolios engaging in arbitrage (Moyo et al, 2023;Olowe, 1996). Expecting a comparable pattern during the ongoing Russia-Ukraine war seems admissible.…”

Verification of the Weak-Form Informational Efficiency of Fuel Markets in the Visegrad Group

“…However, in the 1980s, research on the informational efficiency of commodity markets, primarily the oil market, were initiated. In the last decade, this issue has been explored, for example, by Zahng et al [2014], Górska, Krawiec [2016], Dimitriadou et al [2018], Ghazani, Ebrahimi [2019], Bohl et al [2021], Espinosa-Paredes et al [2022] or Moyo et al [2023], who mostly focused their research on the Brent and WTI oil markets. To our best knowledge relatively little work has been done on examining fuel domestic retail markets ( [Hunter, Tabaghdehi 2013], [Valadkhani 2013], [Rosado et al 2021]).…”