COVID-induced sentiment and the intraday volatility spillovers between energy and other ETFs

Muhammad Abubakr Naeem; Sitara Karim; Larisa Yarovaya; Brian M Lucey

doi:10.1016/j.eneco.2023.106677

COVID-induced sentiment and the intraday volatility spillovers between energy and other ETFs

Energy Econ. 2023 Jun:122:106677. doi: 10.1016/j.eneco.2023.106677. Epub 2023 Apr 20.

Authors

Muhammad Abubakr Naeem¹, Sitara Karim², Larisa Yarovaya³, Brian M Lucey^{4

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Affiliations

¹ Accounting and Finance Department, United Arab Emirates University, P.O. Box 15551, Al Ain, United Arab Emirates.
² Department of Economics and Finance, Sunway Business School, Sunway University, Selangor, Malaysia.
³ The Centre for Digital Finance, Southampton Business School, Southampton, United Kingdom.
⁴ Trinity Business School, Trinity College, Dublin, Ireland.
⁵ University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam.
⁶ Jiangxi University of Finance and Economics, Nanchang, China.
⁷ University of Abu Dhabi, Zayed City, Abu Dhabi, United Arab Emirates.

Abstract

Did Covid19 induce market turmoil impact the intraday volatility spillovers between energy and other ETFs?. To examine this, we first estimate the realized volatility of ETFs using the 5-min high-frequency data. Next, we employ time-varying parameter vector autoregressions (TVP-VAR). Finally, we utilize the wavelet coherence measure to test the time-frequency impact of COVID-induced sentiment on the spillovers by employing investors' psychological and behavioural factors. We find that oil and stock markets are net transmitters while currency, bonds, and silver markets are net receivers. The wavelet analysis embarked significant impact of media coverage and fake news index towards shaping investors' pessimism for their investments. We proposed useful implications for policymakers, governments, investors, and portfolio managers.

Keywords: COVID-19; Intraday volatility; TVP-VAR; US ETFs; Wavelet analysis.