Are the Impacts of the COVID-19 Crisis on Financial and Commodity Markets Analogous to the Past Crisis?: A Quantile Copula Spectral Analysis

This chapter compares how large and persistent stock and commodity markets reacted to the COVID-19 crisis to the reactions during the 2008–2009 global financial crisis (GFC). We apply quantile copula coherency to determine what was occurring during these two devastating crises, which we cannot observe in a traditional frequency domain or time domain approach. During the GFC, the 5%-quantile returns of US and European stocks comove (i.e., sharp drops of these stock prices) in both the very short (two- or three-day cycle) and long term (yearly cycle); on the other hand, those of the US and Asian stocks comove relatively in the longer term. Notably, during the COVID-19 period, the 5%-quantile European-US and Japanese-US stock returns highly comove in almost all long/short return cycles. The US stock and oil/gold price returns fluctuate differently during the COVID-19 and GFC periods. The gold price return cycle may reflect the “emergency buying” of gold by selling equities in the short term. Differently from the gold return, the rising concerns of a global recession may be cooling investor sentiments at the time, which may lead to the simultaneous selling of stocks and crude oil.