COVID-19 Pandemic, Oil Prices, Stock Market, Geopolitical Risk and Policy Uncertainty Nexus in the US Economy: Fresh Evidence from the Wavelet-Based Approach

24 Pages Posted: 15 Apr 2020 Last revised: 28 Aug 2021

See all articles by Arshian Sharif

Arshian Sharif

University Utara Malaysia

Chaker Aloui

Prince Sultan University - College of Business Administration

Larisa Yarovaya

University of Southampton - Southampton Business School

Date Written: April 13, 2020

Abstract


In this paper, we analyze the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework. The coherence wavelet method and the wavelet-based Granger causality tests applied to US recent daily data unveil the unprecedented impact of COVID-19 and oil price shocks on the geopolitical risk levels, economic policy uncertainty and stock market volatility over the low frequency bands. The effect of the COVID-19 on the geopolitical risk substantially higher than on the US economic uncertainty. The COVID-19 risk is perceived differently over the short and the long-run and may be firstly viewed as an economic crisis. Our study offers several urgent prominent implications and endorsements for policymakers and asset managers

Keywords: COVID-19, economic policy uncertainty, stock market, oil prices, wavelets

JEL Classification: F30, F21, G01, G15

Suggested Citation

Sharif, Arshian and Aloui, Chaker and Yarovaya, Larisa, COVID-19 Pandemic, Oil Prices, Stock Market, Geopolitical Risk and Policy Uncertainty Nexus in the US Economy: Fresh Evidence from the Wavelet-Based Approach (April 13, 2020). Available at SSRN: https://ssrn.com/abstract=3574699 or http://dx.doi.org/10.2139/ssrn.3574699

Arshian Sharif

University Utara Malaysia ( email )

Chaker Aloui

Prince Sultan University - College of Business Administration ( email )

PO Box 66833
Riyadh, Riyadh 11586
Saudi Arabia

Larisa Yarovaya (Contact Author)

University of Southampton - Southampton Business School ( email )

Highfield
University Road
Southampton, SO17 1BJ
United Kingdom

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