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The financial impacts of jump processes in the crude oil price: Evidence from G20 countries in the pre- and post-COVID-19

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  • Alqahtani, Abdullah
  • Selmi, Refk
  • Hongbing, Ouyang

Abstract

This study seeks to compare the responses of G20 stock markets to the double blow of COVID-19 and the historic oil price shock. By considering two different periods with distinct anxiety levels, namely the pre- and the post- COVID-19, we first explore the volatility spillovers between the spot price of crude oil and the stock markets. Second, we use a GARCH with jump intensity model to test whether the arrival of new information leads to unusual and rapid changes (or jumps) in crude oil prices. After investigating the potential presence of jumps in the spot price of crude oil, we perform a dynamic copula-based approach to assess the impacts on G20 stock prices under different volatility regimes. Our results show that the volatility transmission from oil to the G20 stock markets is significant for all countries, though with varying extents. The volatility transmission became more pronounced with the onslaught of the coronavirus pandemic. These findings provide relevant information to agents with respect to the stock market in which they need to invest at the current situation of acute distress caused by the pandemic in an effort to mitigate risks.

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  • Alqahtani, Abdullah & Selmi, Refk & Hongbing, Ouyang, 2021. "The financial impacts of jump processes in the crude oil price: Evidence from G20 countries in the pre- and post-COVID-19," Resources Policy, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:jrpoli:v:72:y:2021:i:c:s030142072100091x
    DOI: 10.1016/j.resourpol.2021.102075
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    More about this item

    Keywords

    COVID-19 pandemic; Crude oil prices; G20 stock markets; Jumps; Volatility transmission; Dynamic correlations;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G1 - Financial Economics - - General Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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