Connectedness of COVID vaccination with economic policy uncertainty, oil, bonds, and sectoral equity markets: evidence from the US.

We examine the connectedness of the COVID vaccination with the economic policy uncertainty, oil, bonds, and sectoral equity markets in the US within time and frequency domain. The wavelet-based findings show the positive impact of COVID vaccination on the oil and sector indices over various frequency scales and periods. The vaccination is evidenced to lead the oil and sectoral equity markets. More specifically, we document strong connectedness of vaccinations with communication services, financials, health care, industrials, information technology (IT) and real estate equity sectors. However, weak interactions exist within the vaccination-IT-services and vaccination-utilities pairs. Moreover, the effect of vaccination on the Treasury bond index is negative, whereas the economic policy uncertainty shows an interchanging lead and lag relation with vaccination. It is further observed that the interrelation between vaccination and the corporate bond index is insignificant. Overall, the impact of vaccination on the sectoral equity markets and economic policy uncertainty is higher than on oil and corporate bond prices. The study offers several important implications for investors, government regulators, and policymakers.

Tail spillover effects between cryptocurrencies and uncertainty in the gold, oil, and stock markets.

This study investigates tail dependence among five major cryptocurrencies, namely Bitcoin, Ethereum, Litecoin, Ripple, and Bitcoin Cash, and uncertainties in the gold, oil, and equity markets. Using the cross-quantilogram method and quantile connectedness approach, we identify cross-quantile interdependence between the analyzed variables. Our results show that the spillover between cryptocurrencies and volatility indices for the major traditional markets varies substantially across quantiles, implying that diversification benefits for these assets may differ widely across normal and extreme market conditions. Under normal market conditions, the total connectedness index is moderate and falls below the elevated values observed under bearish and bullish market conditions. Moreover, we show that under all market conditions, cryptocurrencies have a leadership influence over the volatility indices. Our results have important policy implications for enhancing financial stability and deliver valuable insights for deploying volatility-based financial instruments that can potentially provide cryptocurrency investors with suitable hedges, as we show that cryptocurrency and volatility markets are insignificantly (weakly) connected under normal (extreme) market conditions.

For whom does it pay to be a moral capitalist? Sustainability of corporate financial performance of ESG investment.

This paper analyzes the risk-return characteristics of socially responsible investing by employing a time-varying capital gain and Sharpe ratio analysis for various investment horizons. We employ the MSCI ESG (environmental, social and governance) leaders indices in ten markets encompassing Australia, Canada, Europe, Japan, UK, USA, China, India, Russia, and South Africa. Our sample ranges from 2007-2020. We document that ESG investments have very desirable return and hedging attributes for investors in these markets, and especially so in the USA and emerging markets.

Asymmetric impacts of geopolitical risk on stock markets: A comparative analysis of the E7 and G7 equities during the Russian-Ukrainian conflict.

In a nonparametric quantile-on-quantile regression model, we analyze the asymmetric financial impact of the Russian-Ukrainian conflict-induced geopolitical risk (GPR) on the top-seven emerging (E7) and developed (G7) stock markets. Our findings indicate that the impact of GPR on stock markets is not only market-specific but also asymmetric. Except for Russia and China, all E7 and G7 stocks respond positively to GPR in normal conditions. Among the E7 (G7) countries, stock markets from Brazil, China, Russia, and Turkey (France, Japan, and the US) are resilient to GPR in bearish stages. The portfolio and policy implications of our findings have been highlighted.

Oil price shocks and the term structure of the US yield curve: a time-frequency analysis of spillovers and risk transmission.

This paper investigates the influence of oil demand, oil supply, and risk-driven shocks on the yield curve in the US between 1995 and 2020. The US term-structure shape is modeled by three structural factors, the level, slope, and curvature. Their empirical analysis is performed according to the Diebold-Li modified variant of the widely used Nelson-Siegel model. The technique of wavelet analysis allows investigating the interrelation of shocks in oil prices and the US yield curve along time and frequency domains, simultaneously. We report on low, medium, and high coherence zones, relative to the oil price movements and the changes in the three yield-curve factors. The low coherence intervals indicate the potential for the three latent factors to be used for creating diversification strategies capable of hedging adverse dynamics in the oil market, potentially workable through global crises. We document the variability of dynamic patterns observable for the US sovereign yield factors on per-type-of-shock basis, evidencing the potential role of the US sovereign debt investments for designing cross-asset hedge strategies for commodity and fixed-income markets.

Impact of the Covid-19 induced panic on the Environmental, Social and Governance leaders equity volatility: A time-frequency analysis.

We apply wavelet analyses to study how the Covid-19 fueled panic influenced the volatility of ESG (environmental, social and governance) leaders' indices encompassing the World, the USA, Europe, China, and the Emerging Markets. We document intervals of the low, medium, and high coherence between the Coronavirus Panic Index and the price moves of the ESG Leaders indices. The low coherence intervals signify the diversification potential of ESG investments during a systemic pandemic such as Covid-19. We document differences in the pattern exhibited by various geographical indices highlighting their potential role for designing cross-geography hedge strategies, both now and in the future.

The impact of the Covid-19 related media coverage upon the five major developing markets.

This paper analyses the influence of the Covid-19 coverage by the social media upon the shape of the sovereign yield curves of the five major developing countries, namely Federative Republic of B razil, Russian Federation, Republic of India, People's Republic of China, and the Republic of South Africa (BRICS). The coherenc e between the level, slope, and the curvature of the sovereign yield term structures and the Covid-19 medi a coverage is found to vary between low and high ranges, depending on the phases of the pandemic. The empirical estimations of the yield-curve factors a re performed by means of the Diebold-Li modified version of the Nelson-Siegel model. The intervals of low coherence reveal the capacity of the two latent factors, level and slope, to be used for creating cross-factor diversification strategies, workable under crisis conditions, as evidenced on the example of the ongoing pandemic. Diverse coherence patterns are reported on a per-country basis, highlighting a promising potential of sovereign debt investments for designing cross-country and cross-factor fixed-income strategies, capable of hedging downside risks.

Return and volatility transmission between oil price shocks and agricultural commodities.

This paper studies the connectedness between oil price shocks and agricultural commodities. Our sample period ranges from January 2002 to July 2020, covering the three global crises; Global Financial Crisis, the European sovereign debt crisis and Covid-19 pandemic crisis. We employ Granger causality tests, and the static and dynamic connectedness spillover index methodology. We find that the shocks in oil prices are Granger-caused mainly by price changes of grains, live cattle, and wheat, while supply shock granger causes variations mostly in grain prices. We find that, from the point of view of static connectedness, for both, price and volatility spillovers, the livestock is the largest transmitter, while the lean hogs are the major receiver. Our dynamic analysis evidences that connectedness increases during the financial crisis period. Our results are potentially useful for investors, portfolios managers and policy makers.

The impact of Covid-19 on commodity markets volatility: Analyzing time-frequency relations between commodity prices and coronavirus panic levels.

We apply wavelet analyses to study how the Covid pandemic influenced the volatility of commodity prices, covering various classes of commodities. We document the intervals of low, medium, and high coherence between the coronavirus panic index and the moves of the commodity prices. The low coherence intervals indicate the diversification potential of commodity investments during a systemic pandemic such as Covid-19. We document differences in the observed patterns per commodity category and evidence their potential role for designing cross-assets hedge strategies based on investments in commodities.

A time-frequency analysis of the impact of the Covid-19 induced panic on the volatility of currency and cryptocurrency markets.

We apply wavelet analyses to examine the impact of the Covid-19 fueled panic on the volatility of major fiat and cryptocurrency markets during January-May, 2020. There is high coherence between moves of the Coronavirus Panic Index and the price moves in Euro, British pound, and Renminbi currencies as well as movements of the Bloomberg Galaxy Crypto Index. The main conclusions for each index pair are quite similar and corroborate with our thesis that the cross-currency hedge strategies, which could work under normal market conditions, are likely to fail during the periods of global crisis, e.g., such as the Covid-19 pandemic. However, we document some important differences in currency markets behavior, which potentially could be used to design effective cross-currency hedges capable of withstanding adverse impacts of global financial and economic turmoil. Our findings could be of use for future development of financial policies and currency markets regulation rules.