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COVID-19 pandemic waves and global financial markets: Evidence from wavelet coherence analysis

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  • Karamti, Chiraz
  • Belhassine, Olfa

Abstract

This paper investigates the connectedness between the COVID-19 outbreak and major financial markets within a time-frequency framework. Wavelet coherency analysis unveils perceptual differences between the short-term and longer-term markets’ reactions. In the short-run, we find strong co-movements during the first and second waves of the pandemic. During the first wave, longer-term investors were driven by the belief of future pandemic demise. They make use of time diversification that results in positive returns. The US being the new coronavirus epicenter, we also find that the US COVID-19 fear spills over into the international markets. Gold, SSE, and cryptocurrencies seem safer investments.

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  • Karamti, Chiraz & Belhassine, Olfa, 2022. "COVID-19 pandemic waves and global financial markets: Evidence from wavelet coherence analysis," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002178
    DOI: 10.1016/j.frl.2021.102136
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    References listed on IDEAS

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    Cited by:

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    3. Mohd Ziaur Rehman & Shabeer Khan & Ghulam Abbas & Mohammed Alhashim, 2023. "Novel COVID-19 Outbreak and Global Uncertainty in the Top-10 Affected Countries: Evidence from Wavelet Coherence Approach," Sustainability, MDPI, vol. 15(6), pages 1-20, March.
    4. Gök, Remzi & Bouri, Elie & Gemici, Eray, 2022. "Can Twitter-based economic uncertainty predict safe-haven assets under all market conditions and investment horizons?," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    5. Feng, Yun & Yang, Jie & Huang, Qian, 2023. "Multiscale correlation analysis of Sino-US corn futures markets and the impact of international crude oil price: A new perspective from the multifractal method," Finance Research Letters, Elsevier, vol. 53(C).
    6. Bampinas, Georgios & Panagiotidis, Theodore, 2023. "How would the war and the pandemic affect the stock and cryptocurrency cross-market linkages?," MPRA Paper 117094, University Library of Munich, Germany.
    7. Iyer, Subramanian Rama & Simkins, Betty J., 2022. "COVID-19 and the Economy: Summary of research and future directions," Finance Research Letters, Elsevier, vol. 47(PB).
    8. Cervantes, Paula & Díaz, Antonio & Esparcia, Carlos & Huélamo, Diego, 2022. "The impact of COVID-19 induced panic on stock market returns: A two-year experience," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1075-1097.
    9. Huang, Jie & Cao, Yu & Zhong, Pengshu, 2022. "Searching for a safe haven to crude oil: Green bond or precious metals?," Finance Research Letters, Elsevier, vol. 50(C).
    10. Olanipekun, Ifedolapo Olabisi & Ozkan, Oktay & Olasehinde-Williams, Godwin, 2023. "Is renewable energy use lowering resource-related uncertainties?," Energy, Elsevier, vol. 271(C).

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    More about this item

    Keywords

    Covid-19; Wavelets; Co-movement; Stock market; Volatility;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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