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COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach

ABSTRACT: In this paper, we analyze the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework. The coherence wavelet method and the wavelet-based Granger causality tests applied to US recent daily data unveil the unprecedented impact of COVID-19 and oil price shocks on the geopolitical risk levels, economic policy uncertainty and stock market volatility over the low frequency bands. The effect of the COVID-19 on the geopolitical risk substantially higher than on the US economic uncertainty. The COVID-19 risk is perceived differently over the short and the long-run and may be firstly viewed as an economic crisis. Our study offers several urgent prominent implications and endorsements for policymakers and asset managers. Highlights • We analyze the time-frequency relationship between COVID-19 outbreak, oil price, geopolitical risk, economic uncertainty and US stock market.• The wavelet-based approach shows that the associations between the variables vary across time and investment horizons.• COVID-19 outbreak has a greater effect on the US geopolitical risk and economic uncertainty than on the US stock market.• Oil is leading the US market at low and high frequencies throughout the observation period.• While oil markets may recover through OPEC+ negotiations, the COVID-19 uncertainty remains the main concern of US policymakers.

SUBMITTER: Sharif A

PROVIDER: S-EPMC7227524 | biostudies-literature | 2020 May

REPOSITORIES: biostudies-literature

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COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach

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