Abstract
The economic impact of the containment measures enacted in most countries as a result of the health crisis caused by the COVID-19 pandemic is unprecedented. Within this context, the main purpose of this analysis is to explore the impact of COVID-19 on the volatility transmission among American, European, and Chinese stock, energy, and commodity markets, both in the short and long-run. The empirical findings highlight that the COVID-19 pandemic has a strong impact on the linkages between the studied markets. The volatilities, correlations, and connectedness are stronger during the COVID-19 time lapse. However, these results vary between the short-run and the long-run investment horizons.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
Financial Times: Global recession already here, say top economists.: https://www.ft.com/content/be732afe-6526-11ea-a6cd-df28cc3c6a68
- 2.
The selection of these markets is motivated by many reasons. First, the Chinese stock market is highly integrating and a substantial increase in the dependence between it and other market (Wu et al. 2019; Xiao 2020). Second, the Chinese market acts as the epicenter of both physical and financial contagion (Corbet et al. 2020). Finally, the American and the European are two superpowers that are also affected by this novel virus.
- 3.
To learn more about the advantages of using this technique, see In and Kim (2006).
- 4.
J should describe the maximum integer such that 2j has a value less than the number of observations.
- 5.
Even the DWT is very used in economic research, the CWT it is also, due to their advantages related to data decomposition of many variables at the same time, see Grinsted et al. (2004).
- 6.
The choice of a filter length L = 8 responds to the reasonable strategy suggesting that using the smallest L that gives reasonable results and provides the most accurate time-alignment between wavelet coefficients at various scales and the original time-series.
- 7.
The stoppage of economic activities in the world has pushed oil consumption down sharply and even into negative demand.
References
Al-Awadhi, A. M., Al-Saifi, K., Al-Awadhi, A., & Alhamadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27, 100326. https://doi.org/10.1016/j.jbef.2020.100326
Alfaro, L., Chari, A., Greenland, A. N. & Schott. P. K. (2020). Aggregate and firm-level stock returns during pandemics, in real time. NBER Working Paper, No. 26950.
Baur, D. G., & McDermott, T. K. J. (2010). Is gold a safe haven? International evidence. Journal of Banking & Finance, 34, 1886–1898.
Baur, D. G., & McDermott, T. K. J. (2016). Why is gold a safe haven? Journal of Behavioral and Experimental Finance, https://doi.org/10.1016/j.jbef.2016.03.002.
Corbet, S., Larkin, C., & Lucey, B. (2020). The contagion effects of the covid-19 pandemic: Evidence from gold and cryptocurrencies. Finance Research Letters, 101554.
Georgieva, K (2020). IMF Managing Director Kristalina Georgieva’s Statement Following a G20 Ministerial Call on the Coronavirus Emergency. IMF Press Statement. Available at: https://www.imf.org/fr/News/Articles/2020/03/23/pr2098-imf-managing-director-statement-following-a-g20-ministerial-call-on-the-coronavirus-emergency.
Gerding, F., Martin, T. & Nagler, F. (2020). The value of fiscal capacity in the face of a rare disaster. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3572839.
Grinsted, A., Moore, J. C., & Jevrejeva, S. (2004). Application of the cross wavelet transform and wavelet coherence to geophysical time series.
In, F., & Kim, S. (2006). The hedge ratio and the empirical relationship between the stock and futures markets: A new approach using wavelet analysis. The Journal of Business, 79(2), 799–820.
Ramelli, S., & Wagner, A. (2020). What the stock markets tells us about the consequences of COVID-19. In R. Baldwin & B. Welder Di Mauro (Eds.), Mitigating the COVID Economic Crisis (pp. 63–67). CEPR Press.
Torun, E., Chang, T. P., & Chou, R. Y. (2020). Causal relationship between spot and futures prices with multiple time horizons: A nonparametric wavelet Granger causality test. Research in International Business and Finance, 52, 101115.
Urom, C., Mzoughi, H., Abid, I., & Brahim, M. (2021). Green markets integration in different time scales: A regional analysis. Energy Economics, 98, 105254.
Wu, F., Zhang, D., & Zhang, Z. (2019). Connectedness and risk spillovers in China’s stock market: A sectoral analysis. Economic Systems, 43(3–4), 100718.
Xiao, Y. (2020). The risk spillovers from the Chinese stock market to major East Asian stock markets: A MSGARCH-EVT-copula approach. International Review of Economics& Finance, 65, 173–186.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Tarchella, S., Mzoughi, H., Belaid, F. (2022). The Impact of COVID-19 on the Volatility Transmission Across Equity and Commodity Markets. In: Goutte, S., Guesmi, K., Urom, C. (eds) Financial Market Dynamics after COVID 19 . Contributions to Finance and Accounting. Springer, Cham. https://doi.org/10.1007/978-3-030-98542-4_8
Download citation
DOI: https://doi.org/10.1007/978-3-030-98542-4_8
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-98541-7
Online ISBN: 978-3-030-98542-4
eBook Packages: Economics and FinanceEconomics and Finance (R0)