Extreme co-movements between infectious disease events and crude oil futures prices: From extreme value analysis perspective

This paper examines the extreme co-movements between infectious disease events and crude oil futures through extreme value analyses. We contribute to the literature by providing a novel framework of tail risk early warning and considering infectious diseases as a systemic risk factor for crude oil futures. The results provide evidence that: (1) when an extreme event occurs, the tail index of the infectious disease reaches its empirical lower threshold, which is approximately 2.30; (2) when a jump in volatility corresponding to the severeness of the epidemic is observed, the tail index reaches the lower bound, but not reversely; (3) both upside and downside extreme co-movements exist, whereas they are asymmetric; and (4) each tail quotient correlation coefficient keeps rising and reaches a peak before crises and fall sharply with the collapse of crude oil markets. The findings can offer implications for government officials, investors, portfolio managers, and policymakers, respectively.