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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.

Suggested Citation

  • 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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    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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