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Volatility spillovers and contagion between energy sector and financial assets during COVID-19 crisis period

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  • Achraf Ghorbel

    (University of Sfax)

  • Ahmed Jeribi

    (University of Monastir)

Abstract

In this paper, we examine the relationship between the volatilities of the energy index, crude oil, gas prices, and financial assets (Gold, Bitcoin, and G7 stock indexes), especially during the coronavirus crisis. The study tests the presence of regime changes in the GARCH volatility dynamics of the G7 stock indexes, Bitcoin, Gold, and energy assets (energy index, oil, and gas) by using the Markov–Switching GARCH model. It estimates the dynamic correlation and volatility spillover between energy and financial assets, by using the multivariate MSGARCH models. The estimation results of the Markov-Switching-BEKK-GARCH prove the volatility spillover from energy assets to financial assets. For the high regime, the results indicate a high level of dynamic correlation between energy assets and stock indexes which proves the contagion effect of the COVID-19. On the contrary, the dynamic conditional correlation between energy assets and Gold prices decreased during the COVID-19 crisis. This paper makes an original contribution in identifying the contagion between energy and financial assets and indicates that Gold is a safe haven for all energy and financial assets during the COVID-19 crisis. However, Bitcoin cannot be considered as a safe haven during the COVID-19 pandemic when investing in energy assets (crude oil and gas).

Suggested Citation

  • Achraf Ghorbel & Ahmed Jeribi, 2021. "Volatility spillovers and contagion between energy sector and financial assets during COVID-19 crisis period," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 449-467, September.
    • Handle: RePEc:spr:eurase:v:11:y:2021:i:3:d:10.1007_s40822-021-00181-6
    DOI: 10.1007/s40822-021-00181-6
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    3. Ozdemir, Huseyin & Ozdemir, Zeynel Abidin, 2021. "A Survey of Hedge and Safe Havens Assets against G-7 Stock Markets before and during the COVID-19 Pandemic," IZA Discussion Papers 14888, Institute of Labor Economics (IZA).
    4. Clement Moyo & Izunna Anyikwa & Andrew Phiri, 2023. "The Impact of Covid-19 on Oil Market Returns: Has Market Efficiency Being Violated?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 118-127, January.
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    6. Huszár, Zsuzsa R. & Kotró, Balázs B. & Tan, Ruth S.K., 2023. "Dynamic volatility transfer in the European oil and gas industry," Energy Economics, Elsevier, vol. 127(PA).
    7. José Almeida & Tiago Cruz Gonçalves, 2022. "Portfolio Diversification, Hedge and Safe-Haven Properties in Cryptocurrency Investments and Financial Economics: A Systematic Literature Review," JRFM, MDPI, vol. 16(1), pages 1-25, December.
    8. Mila Andreani & Vincenzo Candila & Giacomo Morelli & Lea Petrella, 2021. "Multivariate Analysis of Energy Commodities during the COVID-19 Pandemic: Evidence from a Mixed-Frequency Approach," Risks, MDPI, vol. 9(8), pages 1-20, August.
    9. Thiago Pires Santana & Nicole Horta & Catarina Revez & Rui Manuel Teixeira Santos Dias & Gilney Figueira Zebende, 2023. "Effects of Interdependence and Contagion on Crude Oil and Precious Metals According to ρ DCCA : A COVID-19 Case Study," Sustainability, MDPI, vol. 15(5), pages 1-12, February.
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