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How has the relationship between oil and the US stock market changed after the Covid-19 crisis?

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  • Sakurai, Yuji
  • Kurosaki, Tetsuo

Abstract

In this paper, we investigate how the relationship between oil and the US stock market has changed after the onset of Covid-19 crisis. To do so, we compute upside and downside correlations between the two markets. Our findings are as follows. First, we document the correlation asymmetry: the downside correlation is higher than the upside correlation. Second, we find that both upside and downside correlations increased after the crisis. This indicates that after the start of the Covid-19 crisis, a positive (negative) oil shock is even better (worse) news for the stock market than an equivalent shock before the crisis.

Suggested Citation

  • Sakurai, Yuji & Kurosaki, Tetsuo, 2020. "How has the relationship between oil and the US stock market changed after the Covid-19 crisis?," Finance Research Letters, Elsevier, vol. 37(C).
    • Handle: RePEc:eee:finlet:v:37:y:2020:i:c:s1544612320315877
    DOI: 10.1016/j.frl.2020.101773
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    References listed on IDEAS

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    More about this item

    Keywords

    WTI; Non-normality; Mixture models; Nonparametric test; Dynamic conditional correlation model;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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