COVID-19 and extreme risk spillovers between oil and BRICS stock markets: A multiscale perspective

Xiu Jin, Yueli Liu, Jinming Yu and Weiqiang Huang

The North American Journal of Economics and Finance, 2023, vol. 68, issue C

Abstract: This paper uses the VMD-Copula-ΔCoVaR model to examine the dynamic characteristics of extreme risk spillovers between the oil market and BRICS stock markets during COVID-19 from a multiscale perspective. Using daily data from January 1, 2019 to December 31, 2021, the empirical results show that: (1) Bidirectional extreme risk spillovers exist between oil and BRICS stock markets for the original return series, short-term, medium-term, and long-term components, with BRICS stock markets generally exporting higher risk to the oil market than they receive. (2) The magnitude of risk spillovers at all time scales presents an inverted V-shaped pattern during COVID-19, increasing with the worsening of the pandemic and the oil price war, then decreasing after various countermeasures. (3) Following the COVID-19 vaccine rollout, the long-term spillovers between oil and stock markets in countries such as Brazil, China, and South Africa have returned to or even fallen below pre-pandemic levels. Conversely, the magnitude of short-term and medium-term risk spillovers generally remains higher than pre-COVID-19 levels. (4) The short- and medium-term components are the primary contributors to overall risk spillovers, whereas the long-term component contributes the least. (5) Oil and the Russian stock market exhibit the strongest risk spillovers at all time scales, while oil and the Chinese stock market have the weakest risk spillovers. Overall, our findings suggest that investors and policymakers should consider the impact of the COVID-19 pandemic and various countermeasures on the multiscale spillovers between oil and BRICS stock markets to optimize decision-making and maintain financial market stability.

Keywords: COVID-19; Multiscale risk spillovers; Oil; BRICS stock markets; Delta CoVaR (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823000906

DOI: 10.1016/j.najef.2023.101967

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