RETURN CONNECTEDNESS AMONG ENERGY AND FINANCIAL MARKETS PRE AND DURING THE COVID-19 PANDEMIC: EVIDENCE FROM CHINA AND THE US

Abstract

This paper explores the return connectedness among energy and financial markets in China and the US pre and during the COVID-19 pandemic. We find that the spillovers during COVID-19 were obviously higher than normal period, and before COVID-19, the total spillover effects of Chinese markets are larger than that of the US, while during the COVID-19, the situation is just the opposite. Second, before COVID-19, crude oil, fuel oil, gold, and silver are the main net contributors, gasoline, natural gas, platinum, equities, and exchange rate are the main receivers. However, in the context of the COVID-19 pandemic, the roles of crude oil, gold, gasoline, and platinum as net contributors or net recipients experienced a reversal. Third, during the COVID-19, in the US, the strongest net contributor shifts from gold to fuel oil. In China, silver always be the strongest net contributor. The above findings suggest that policymakers are advised to promptly adjust regulatory policies, and investors should adopt a discerning approach to asset allocation.