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Correlations and Volatility Spillovers Between WTI, Natural Gas, and Stock Markets During COVID-19 and the Russo-Ukrainian War

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  • Lamia Sebai
  • Yasmina Jaber

Abstract

This study investigates the extent of time-varying volatility and correlations between crude WTI (West Texas Intermediate), Natural Gas, and stock markets in the significant WTI-exporting (Russia, Norway, Canada) and WTI-importing (USA, China, Japan) countries during the COVID-19 crisis and the Russo-Ukrainian war. We employ the BEKK- MGARCH methodology with daily data of Brent prices Gas prices and six stock markets covering the period from 01 January 2020 to 30 October 2022. We find evidence of bi-directional transmission and volatility linkages between Gas and WTI and between WTI and all assets studied except Russia. While we document a negative relationship between the past conditional volatility of WTI and the current level of volatility of Russia, the past volatility of Russia positively affects the current volatility of WTI. Finally, the time-varying conditional correlations exist between crude WTI, Natural Gas, and stock markets during COVID-19 and the Russo-Ukrainian war. Trans-Abstract: Correlations and Volatility Spillovers Between WTI, Natural Gas, and Stock Markets During COVID-19 and the Russo-Ukrainian War This study investigates the extent of time-varying volatility and correlations between crude WTI (West Texas Intermediate), Natural Gas, and stock markets in the significant WTI-exporting (Russia, Norway, Canada) and WTI-importing (USA, China, Japan) countries during the COVID-19 crisis and the Russo-Ukrainian war. We employ the BEKK- MGARCH methodology with daily data of Brent prices Gas prices and six stock markets covering the period from 01 January 2020 to 30 October 2022. We find evidence of bi-directional transmission and volatility linkages between Gas and WTI and between WTI and all assets studied except Russia. While we document a negative relationship between the past conditional volatility of WTI and the current level of volatility of Russia, the past volatility of Russia positively affects the current volatility of WTI. Finally, the time-varying conditional correlations exist between crude WTI, Natural Gas, and stock markets during COVID-19 and the Russo-Ukrainian war.

Suggested Citation

  • Lamia Sebai & Yasmina Jaber, 2023. "Correlations and Volatility Spillovers Between WTI, Natural Gas, and Stock Markets During COVID-19 and the Russo-Ukrainian War," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 69(1), pages 49-60.
    • Handle: RePEc:dah:aeqaeq:v69_y2023_i1_q1_p49-60
    DOI: 10.3790/aeq.69.1.49
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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • 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

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