Infectious disease equity market volatility, geopolitical risk, speculation, and commodity returns: Comparative analysis of five epidemic outbreaks

This paper uses a time-varying Granger causality test and time-varying parameter vector autoregression with stochastic volatility model to analyze the effects of infectious disease equity market volatility (ID-EMV), geopolitical risk (GPR), and speculation on commodity returns. The time-varying effects of ID-EMV, GPR, and speculation on commodity returns are investigated and compared in five epidemics during 1998–2021: Bird Flu in 1998, SARS in 2003, Swine Flu in 2009, MERS and Ebola in 2014, and COVID-19 in 2019. A further analysis is performed for five commodity subcategories of textiles, industry, metals, livestock, and food. Results show that time-varying effects are significant, and most responses to ID-EMV are positive, to GPR are changing from negative to positive, and to speculation are negative. Notably, ID-EMV in the ongoing COVID-19 pandemic is the worst hit to commodity returns in more than two decades.