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Co-movement of energy prices and stock market return: environmental wavelet nexus of COVID-19 pandemic from the USA, Europe, and China

  • Chien, FengSheng1, 2
  • Sadiq, Muhammad3
  • Kamran, Hafiz Waqas4
  • Nawaz, Muhammad Atif5
  • Hussain, Muhammed Sajjad6
  • Raza, Muhammad7
  • 1 Fuzhou University of International Studies and Trade,
  • 2 City University of Macau,
  • 3 Taylor’s University,
  • 4 Iqra University,
  • 5 The Islamia University of Bahawalpur,
  • 6 The Superior College, Lahore, Pakistan
  • 7 Emaan Institute of Management and Science, Karachi, Pakistan
Published Article
Environmental Science and Pollution Research
Publication Date
Feb 23, 2021
DOI: 10.1007/s11356-021-12938-2
PMID: 33624244
PMCID: PMC7901867
PubMed Central


This work aims to study the time-frequency relationship between the recent COVID-19 pandemic and instabilities in oil price and the stock market, geopolitical risks, and uncertainty in the economic policy in the USA, Europe, and China. The coherence wavelet method and the wavelet-based Granger causality tests are applied to the data (31st December 2019 to 1st August 2020) based on daily COVID-19 observations, oil prices, US-EPU, the US geopolitical risk index, and the US stock price index. The short- and long-term COVID-19 consequences are depicted differently and may initially be viewed as an economic crisis. The results illustrate the reduced industrial productivity, which intensifies with the increase in the pandemic’s severeness (i.e., a 10.57% decrease in the productivity index with a 1% increase in the pandemic severeness). Similarly, indices for oil demand, stock market, GDP growth, and electricity demand decrease significantly with an increase in the pandemic severeness index (i.e., a 1% increase in the pandemic severeness results in a 0.9%, 0.67%, 1.12%, and 0.65% decrease, respectively). However, the oil market shows low co-movement with the stock exchange, exchange rate, and gold markets. Therefore, investors and the government are recommended to invest in the oil market to generate revenue during the sanctions period.

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