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Signs of Fluctuations in Energy Prices and Energy Stock-Market Volatility in Brazil and in the US

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  • Gabriel Arquelau Pimenta Rodrigues

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • André Luiz Marques Serrano

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • Gabriela Mayumi Saiki

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • Matheus Noschang de Oliveira

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • Guilherme Fay Vergara

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • Pedro Augusto Giacomelli Fernandes

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • Vinícius Pereira Gonçalves

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

  • Clóvis Neumann

    (Department of Electrical Engineering, University of Brasilia, Federal District, Brasilia 70910-900, Brazil
    These authors contributed equally to this work.)

Abstract

Volatility reflects the degree of variation in a time series, and a measurement of the stock performance in the energy sector can help one understand the pattern of fluctuations within this industry, as well as the factors that influence it. One of these factors could be the COVID-19 pandemic, which led to extreme volatility within the stock market in several economic sectors. It is essential to understand this regime of volatility so that robust financial strategies can be adopted to handle it. This study used stock data from the Yahoo! Finance API and data from the energy-price database from the US Energy Information Administration to conduct a comparative analysis of the volatility in the energy sector in Brazil and in the United States, as well as of the energy prices in California. The volatility in these time series were modeled using GARCH. The stock volatility regimes, both before and after COVID-19, were identified with a Markov switching model; the spillover index between the energy markets in the USA and in Brazil was evaluated with the Diebold–Yilmaz index; and the causality between the energy stock price and the energy prices was measured with the Granger causality test. The findings of this study show that (i) the volatility regime introduced by COVID-19 is still prevalent in Brazil and in the USA, (ii) the changes in the energy market in the US affect the Brazilian market significantly more than the reverse, and (iii) there is a causality relationship between the energy stock markets and the energy prices in California. These results may assist in the achievement of effective regulation and economic planning, while also supporting better market interventions. Also, acknowledging the persistent COVID-19-induced volatility can help with developing strategies for future crisis resilience.

Suggested Citation

  • Gabriel Arquelau Pimenta Rodrigues & André Luiz Marques Serrano & Gabriela Mayumi Saiki & Matheus Noschang de Oliveira & Guilherme Fay Vergara & Pedro Augusto Giacomelli Fernandes & Vinícius Pereira G, 2024. "Signs of Fluctuations in Energy Prices and Energy Stock-Market Volatility in Brazil and in the US," Econometrics, MDPI, vol. 12(3), pages 1-19, August.
    • Handle: RePEc:gam:jecnmx:v:12:y:2024:i:3:p:24-:d:1462076
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    References listed on IDEAS

    as
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    4. Mensi, Walid & Nekhili, Ramzi & Vo, Xuan Vinh & Suleman, Tahir & Kang, Sang Hoon, 2021. "Asymmetric volatility connectedness among U.S. stock sectors," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
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