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Impact of the COVID-19 Pandemic on the Crude Oil and Stock Markets in the US - A Time-Varying Analysis

Author

Listed:
  • Lu Liu
  • En-Ze Wang
  • Chien-Chiang Lee

    (Asia Pacific Applied Economics Association)

Abstract

This research explores the interaction among the COVID-19 pandemic, crude oil market and stock market in the U.S. by utilizing a time-varying parameter vector auto regression (TVP-VAR) model. Our results indicate that there is a negative connection between crude oil returns and stock returns. Interestingly, contrary to our intuition, we find that the COVID-19 pandemic cannot exert a negative effect but has a statistically significantly positive effect on crude oil returns and stock returns.

Suggested Citation

  • Lu Liu & En-Ze Wang & Chien-Chiang Lee, 2021. "Impact of the COVID-19 Pandemic on the Crude Oil and Stock Markets in the US - A Time-Varying Analysis," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 1(1), pages 1-4.
    • Handle: RePEc:ayb:jrnerl:29
    DOI: 2021/06/16
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    References listed on IDEAS

    as
    1. Lee, Chien-Chiang & Zeng, Jhih-Hong, 2011. "The impact of oil price shocks on stock market activities: Asymmetric effect with quantile regression," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 81(9), pages 1910-1920.
    2. Balcilar, Mehmet & Demirer, Rıza & Hammoudeh, Shawkat, 2019. "Quantile relationship between oil and stock returns: Evidence from emerging and frontier stock markets," Energy Policy, Elsevier, vol. 134(C).
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    4. Jouchi Nakajima, 2011. "Time-Varying Parameter VAR Model with Stochastic Volatility: An Overview of Methodology and Empirical Applications," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 107-142, November.
    5. Arash Habibi & Chin Lee, 2019. "Asymmetric Effects of Exchange Rates on Stock Prices in G7 Countries," Capital Markets Review, Malaysian Finance Association, vol. 27(1), pages 19-33.
    6. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2018. "The impact of oil-market shocks on stock returns in major oil-exporting countries," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 264-280.
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    Cited by:

    1. Yue Dou & Muhammad Shahbaz & Kangyin Dong & Xiucheng Dong, 2022. "How natural disasters affect carbon emissions: the global case," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 113(3), pages 1875-1901, September.

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    More about this item

    Keywords

    crude oil returns; stock returns; covid-19; pandemic;
    All these keywords.

    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth

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