Asymmetric dynamic spillover and time-frequency connectedness in the oil-stock nexus under COVID-19 shock: Evidence from African oil importers and exporters

Yufeng Chen, Zulkifr Abdallah Msofe and Chuwen Wang

Resources Policy, 2024, vol. 90, issue C

Abstract: Amid the profound disruptions triggered by COVID-19 in financial markets, this paper investigates changes in the interconnectedness behavior in terms of mean and volatility contagion between crude oil and stock markets in African oil importers and exporters. To this aim, we employ asymmetric BEKK-Copula-GARCH and Wavelet Coherence methods, and the analyses are evaluated before and during COVID-19. The findings indicate that the interdependence between crude oil and African stock returns is relatively weak before COVID-19, but the strength is amplified during the pandemic. Significant volatility spillover from crude oil to stock markets is exhibited in South Africa, Tunisia, and Tanzania during COVID-19. However, the results are insignificant in all the selected African countries before the pandemic. Furthermore, evidence of asymmetric volatility transmission is uncovered in South Africa and Tunisia during COVID-19. The findings also reveal that the connectedness between crude oil and African stocks is time and frequency dependent, with the strong linkage observed in the mid-term and long-term at specific time points. Overall, this study holds vital contributions as it unveils new insights into how COVID-19 reshaped the traditional behavior regarding the oil-stock nexus in Africa, thus informing policy responses and investment strategies at times of extreme events.

Keywords: Oil price; African stock markets; Dynamic spillover; COVID-19 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724002162

DOI: 10.1016/j.resourpol.2024.104849

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