Does Heterogeneity in COVID-19 News Affect Asset Market? Monte-Carlo Simulation Based Wavelet Transform

Siddique, Asima, Mujtaba, Ghulam ORCID: https://orcid.org/0000-0002-7317-4357 and Ashfaq, Saira (2021) Does Heterogeneity in COVID-19 News Affect Asset Market? Monte-Carlo Simulation Based Wavelet Transform. Journal of Risk and Financial Management, 14 (10).

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Official URL: http://dx.doi.org/10.3390/jrfm14100463

Abstract

The current study investigates the connectedness between US COVID-19 news, Dowes Jones Index (DJI), green bonds, gold, and bitcoin prices for the period 22 January 2020–3 August 2021. The study has employed wavelet coherency, the continuous wavelet transform, and the wavelet-based Granger causality methods to obtain the dependence result. The continuous wavelet transform (CWT) analysis reveals that the United States equity market prices are extremely sensitive with regard to spreading coronavirus (USCOVID-19) news and changes in the oil price. Green bonds, gold, and bitcoin have minimal connectedness with the equity market, which might lead to the hedge and safe haven role of these assets during the COVID-19 crisis period. Lastly, very strong comovement was found between bitcoin and gold during the entire sample. The results of the present study offer a number of fresh and noticeable policy implications for international investors and asset managers.