Can COVID-19 deaths and confirmed cases predict the uncertainty indexes? A multiscale analysis
Studies in Economics and Finance
ISSN: 1086-7376
Article publication date: 13 April 2023
Issue publication date: 25 April 2023
Abstract
Purpose
This study aims to examine the multiscale predictability power of COVID-19 deaths and confirmed cases on the S&P 500 index (USA), CAC30 index (France), BSE index (India), two strategic commodity futures (West Texas intermediate [WTI] crude oil and Gold) and five main uncertainty indices Equity Market Volatility Ticker (EMV), CBOE Volatility Index (VIX), US Economic Policy Uncertainty (EPU), CBOE Crude Oil Volatility Index (OVX) and CBOE ETF Gold Volatility Index (GVZ). Furthermore, the authors analyze the impact of uncertainty indices and COVID-19 deaths and confirmed cases on the price returns of stocks (S&P500, CAC300 and BSE), crude oil and gold.
Design/methodology/approach
The authors used the wavelet coherency method and quantile regression approach to achieve the objectives.
Findings
The results show strong multiscale comovements between the variables under investigation. Lead-lag relationships vary across frequencies. Finally, COVID-19 news is a powerful predictor of the uncertainty indices at intermediate (4–16 days) and low (32–64 days) frequencies for EPU and at low frequency for EMV, VIX, OVX and GVZ indices from January to April 2020. The S&P500, CAC30 and BSE indexes and gold prices comove with COVID-19 news at low frequencies during the sample period. By contrast, COVID-19 news and WTI oil moderately correlated at low frequencies. Finally, the returns on equity and commodity assets are influenced by uncertainty indices and are sensitive to market conditions.
Originality/value
This study contributes to the literature by exploring the time and frequency dependence between COVID-19 news (confirmed and death cases) on the returns of financial and commodity markets and uncertainty indexes. The findings can assist market participants and policymakers in considering the predictability of future prices and uncertainty over time and across frequencies when setting up regulations that aim to enhance market efficiency.
Keywords
Acknowledgements
This research is partly funded by the University of Economics Ho Chi Minh City, Vietnam. The last author acknowledges the financial support by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2022S1A5A2A01038422).
Citation
Mensi, W., Vo, V.X. and Kang, S.H. (2023), "Can COVID-19 deaths and confirmed cases predict the uncertainty indexes? A multiscale analysis", Studies in Economics and Finance, Vol. 40 No. 3, pp. 569-587. https://doi.org/10.1108/SEF-11-2021-0488
Publisher
:Emerald Publishing Limited
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