A threshold effect of COVID-19 risk on oil price returns

Using U.S. data, we investigate how the COVID-19 pandemic influences oil price returns in an asset pricing framework. Unlike earlier studies, we consider a threshold model to allow for the possibility that COVID-19 risk may not play a role until it reaches a certain level. Based on WTI crude oil spo...

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Detalles Bibliográficos
Autores principales: Sun, Yiguo, Li, Delong, Suo, Chenyi, Wang, Yu
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier B.V. 2023
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9995300/
https://www.ncbi.nlm.nih.gov/pubmed/36915626
http://dx.doi.org/10.1016/j.eneco.2023.106618
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author Sun, Yiguo
Li, Delong
Suo, Chenyi
Wang, Yu
author_facet Sun, Yiguo
Li, Delong
Suo, Chenyi
Wang, Yu
author_sort Sun, Yiguo
collection PubMed
description Using U.S. data, we investigate how the COVID-19 pandemic influences oil price returns in an asset pricing framework. Unlike earlier studies, we consider a threshold model to allow for the possibility that COVID-19 risk may not play a role until it reaches a certain level. Based on WTI crude oil spot price data from January 2020 to December 2021, our findings show that oil returns significantly decline with the daily number of COVID-19 deaths but only if the daily death toll exceeds approximately 2100. In addition, a more severe COVID-19 pandemic can substantially increase the exposure of oil returns to various systematic risk factors, which has not been documented in previous literature.
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spelling pubmed-99953002023-03-09 A threshold effect of COVID-19 risk on oil price returns Sun, Yiguo Li, Delong Suo, Chenyi Wang, Yu Energy Econ Article Using U.S. data, we investigate how the COVID-19 pandemic influences oil price returns in an asset pricing framework. Unlike earlier studies, we consider a threshold model to allow for the possibility that COVID-19 risk may not play a role until it reaches a certain level. Based on WTI crude oil spot price data from January 2020 to December 2021, our findings show that oil returns significantly decline with the daily number of COVID-19 deaths but only if the daily death toll exceeds approximately 2100. In addition, a more severe COVID-19 pandemic can substantially increase the exposure of oil returns to various systematic risk factors, which has not been documented in previous literature. Elsevier B.V. 2023-04 2023-03-09 /pmc/articles/PMC9995300/ /pubmed/36915626 http://dx.doi.org/10.1016/j.eneco.2023.106618 Text en © 2023 Elsevier B.V. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Sun, Yiguo
Li, Delong
Suo, Chenyi
Wang, Yu
A threshold effect of COVID-19 risk on oil price returns
title A threshold effect of COVID-19 risk on oil price returns
title_full A threshold effect of COVID-19 risk on oil price returns
title_fullStr A threshold effect of COVID-19 risk on oil price returns
title_full_unstemmed A threshold effect of COVID-19 risk on oil price returns
title_short A threshold effect of COVID-19 risk on oil price returns
title_sort threshold effect of covid-19 risk on oil price returns
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9995300/
https://www.ncbi.nlm.nih.gov/pubmed/36915626
http://dx.doi.org/10.1016/j.eneco.2023.106618
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