Revisiting oil-stock nexus in the time of health crisis: a wavelet approach

Abstract

Purpose

The paper aims at analyzing the co-movements between stock returns and oil prices (West Texas Intermediate, Brent) controlling or not for COVID-19.

Design/methodology/approach

It uses continuous wavelet transforms and wavelet coherence over the period July 19, 2019 to August 16, 2021 based on daily data. Continuous wavelet transforms provide an over complete representation of stock returns signals by letting the translation and scale parameters of the wavelets vary continuously.

Findings

There are not significant evidence supporting the fact that the COVID-19 has altered the relationship between stock returns and oil prices except perhaps in the case of South Africa. In fact, Southern African Development Community stock markets react more to oil prices than to health shock such as the COVID-19.

Originality/value

The findings of the study are original and have not been published anywhere prior.

Citation

Mezui-Mbeng, P., Kouassi, E., Salisu, A. and Yobouet, L.L.E. (2024), "Revisiting oil-stock nexus in the time of health crisis: a wavelet approach", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-12-2021-1864