Dynamic spillovers between natural gas and BRICS stock markets during health and political crises

Mellouli Dhoha (), Wael Dammak (), Hind Alnafisah () and Ahmed Jeribi ()
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Mellouli Dhoha: High Business School of Sfax
Wael Dammak: University of Lyon, University Claude Bernard Lyon 1, Institute of Financial and Insurance Sciences, LSAF-EA2429
Hind Alnafisah: Princess Nourah Bint Abdulrahman University
Ahmed Jeribi: University of Monastir

Eurasian Economic Review, 2024, vol. 14, issue 2, No 9, 453-485

Abstract: Abstract Previous research has primarily focused on external factors to refine predictions of natural gas volatility, a prominent cleaner fossil fuel. Yet, there's a gap in the literature regarding the intrinsic factors impacting the volatility of natural gas returns, especially during crises. Using the TVP-VAR frequency connectedness method, we uncover a pronounced dynamic integration and return transmission between natural gas and BRICS stock markets. Our findings emphasize a strong interconnectedness in both the lower and upper extremes of the return distribution, indicating the profound effects of both negative and positive extreme shocks. We also document symmetric spillover effects in tumultuous market conditions. Short-term spillovers are critical in transmitting shocks, while long-term ones define interconnectedness patterns. Notably, we identify assets that are net-receivers and net-transmitters, with natural gas consistently being a net receiver. Our results provide valuable insights for investors and portfolio managers, emphasizing the need for stringent risk management during crises like COVID-19 and the Russia–Ukraine conflict due to the presence of non-diversifiable systematic risks.

Keywords: COVID-19 pandemic; TVP-VAR; Russian–Ukrainian conflict; BRICS; Natural gas; Connectedness (search for similar items in EconPapers)
JEL-codes: C32 G01 G10 Q02 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40822-023-00254-8

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