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Time-varying dependence between stock markets and oil prices during COVID-19: The case of net oil-exporting countries


  • K.P. Prabheesh

    () (Indian Institute of Technology Hyderabad)

  • Bhavesh Garg

    () (Indian Institute of Technology Ropar)

  • Rakesh Padhan

    () (Indian Institute of Technology Hyderabad)


This article provides an empirical investigation of the time-varying dependence between oil prices and stock markets in the top ten net oil-exporting countries. Using daily data focusing on COVID-19 period, we implement the DCC-GARCH to identify the dynamic dependence. Then, we apply structural break techniques to detect the shift in the dependence structure. We find that there exists a positive time-varying dependence between oil returns and stock returns during the ongoing COVID-19 pandemic wherein the breakpoints mostly coincided with the emergence of oil price war and global stock market crash. Overall, results imply that declining oil prices lead to a fall in stock returns due to lower future earnings for oil companies, exhibiting a signal of reduction in aggregate demand and economic activity in oil-exporting countries. Thus, the high positive co-movement may have ill-effects on portfolio diversification, as the latter will be less effective if the asset returns are highly correlated.

Suggested Citation

  • K.P. Prabheesh & Bhavesh Garg & Rakesh Padhan, 2020. "Time-varying dependence between stock markets and oil prices during COVID-19: The case of net oil-exporting countries," Economics Bulletin, AccessEcon, vol. 40(3), pages 2408-2418.
  • Handle: RePEc:ebl:ecbull:eb-20-00867

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    COVID-19; Stock Markets; Oil Prices; Pandemic;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F3 - International Economics - - International Finance


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