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

Author

Listed:
  • Clement Moyo

    (Nelson Mandela University, South Africa.)

  • Izunna Anyikwa

    (Nelson Mandela University, South Africa.)

  • Andrew Phiri

    (Nelson Mandela University, South Africa.)

Abstract

This study examines the effect of COVID-19 pandemic on the efficiency of oil markets from February 2nd, 2020 to August 4th, 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 16days to 8days. 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.

Suggested Citation

  • Clement Moyo & Izunna Anyikwa & Andrew Phiri, 2023. "The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 118-127, January.
    • Handle: RePEc:eco:journ2:2023-01-16
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    More about this item

    Keywords

    DCC-GARCH; Wavelet coherence; WTI; Brent; OPEC; Efficiency Market Hypothesis; COVID-19;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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