oil market

stock returns

oil price

International Review of Financial Analysis

In this paper, we analyze the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework. The coherence wavelet method and the wavelet-based Granger causality tests applied to US recent daily data unveil the unprecedented impact of COVID-19 and oil price shocks on the geopolitical risk levels, economic policy uncertainty and stock market volatility over the low frequency bands. The effect of the COVID-19 on the geopolitical risk substantially higher than on the US economic uncertainty. The COVID-19 risk is perceived differently over the short and the long-run and may be firstly viewed as an economic crisis. Our study offers several urgent prominent implications and endorsements for policymakers and asset managers. • We analyze the time-frequency relationship between COVID-19 outbreak, oil price, geopolitical risk, economic uncertainty and US stock market. • The wavelet-based approach shows that the associations between the variables vary across time and investment horizons. • COVID-19 outbreak has a greater effect on the US geopolitical risk and economic uncertainty than on the US stock market. • Oil is leading the US market at low and high frequencies throughout the observation period. • While oil markets may recover through OPEC+ negotiations, the COVID-19 uncertainty remains the main concern of US policymakers.

COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach