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COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach

Arshian Sharif (), Chaker Aloui and Larisa Yarovaya

International Review of Financial Analysis, 2020, vol. 70, issue C

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; Geopolitical risk; Stock market; Oil prices; Wavelet; Causality (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.irfa.2020.101496

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