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Infectious Diseases, Market Uncertainty and Oil Market Volatility

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh BP446, Lebanon)

  • Riza Demirer

    (Department of Economics & Finance, Southern Illinois University Edwardsville, Edwardsville, IL 62026-1102, USA)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria 0002, South Africa)

  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, 22008 Hamburg, Germany)

Abstract

We examine the predictive power of a daily newspaper-based index of uncertainty associated with infectious diseases (EMVID) for oil-market volatility. Using the heterogeneous autoregressive realized volatility (HAR-RV) model, we document a positive effect of the EMVID index on the realized volatility of crude oil prices at the highest level of statistical significance, within-sample. Importantly, we show that incorporating EMVID into a forecasting setting significantly improves the forecast accuracy of oil realized volatility at short-, medium-, and long-run horizons. Our findings comprise important implications for investors and risk managers during the unprecedented episode of high uncertainty resulting from the COVID-19 pandemic.

Suggested Citation

  • Elie Bouri & Riza Demirer & Rangan Gupta & Christian Pierdzioch, 2020. "Infectious Diseases, Market Uncertainty and Oil Market Volatility," Energies, MDPI, vol. 13(16), pages 1-8, August.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:16:p:4090-:d:395806
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    References listed on IDEAS

    as
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