Time-Frequency Analysis of COVID-19 Shocks and Energy Commodities

Author:

Agyei Samuel Kwaku1ORCID,Bossman Ahmed1ORCID,Benchie Joseph Kofi Obeng1ORCID,Asiamah Oliver2,Arhin Emmanuel Yaw3ORCID

Affiliation:

1. Department of Finance, School of Business, CC-191-7613, University of Cape Coast, Cape Coast, Ghana

2. Laboratoire d’Analyse et de Prospective Economiques, Universite de Limoges, Limoges, France

3. Department of Accounting, School of Business, CC-191-7613, University of Cape Coast, Cape Coast, Ghana

Abstract

In a time-frequency biwavelet framework, we analysed the short-, medium-, and long-term impacts of COVID-19-related shocks on ten energy commodities (i.e., Brent, crude oil, coal, heating oil, natural gas, gasoline, ethanol, naphtha, propane, and uranium) from January 2020 to April 2022. We document intervals of high and low coherence between COVID-19 cases and the returns on energy commodities across the short-, medium-, and long-term horizons. Low coherence at high frequencies indicated weak correlation and signified diversification, hedging, and safe-haven potentials in the short term of the pandemic. Our findings suggest that energy markets’ dynamics were highly driven by the pandemic, causing significant changes in market returns, particularly across the medium- and low-frequency bands. Furthermore, the empirical results indicate dynamic lead-lag relationships between COVID-19 cases and energy returns between the medium- and long-term horizons, signifying that diversification could be sought through crossinvestment in different energy commodities. The results have significant implications for market participants, regulators, and practitioners.

Publisher

Hindawi Limited

Subject

Multidisciplinary,General Computer Science

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