Crude oil and stock markets in the COVID-19 crisis: evidence from oil exporters and importers

Reinhold Heinlein, Gabriella Legrenzi, Scott Mark Romeo Mahadeo

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Financial assets tend to immediately react to the developments of a global crisis. We investigate how the relationship between crude oil and stock market returns for a heterogeneous selection of oil exporters and importers has been affected in the onset of the COVID-19 pandemic. Using a contagion test based on local Gaussian correlation with high frequency intraday data, we provide evidence of significantly higher correlations between oil and stock markets returns during the COVID-19 outbreak from all countries in our sample. The results also show that stock markets of commodity exporters in different groups of countries have stronger correlations with oil returns than their importing counterparts. Our results are robust to different crisis dating and consistent across different segments of the assets return distributions. These findings indicate a more limited role of oil in portfolio diversification during the global health crisis, which has implications for the hedging strategies of investors in the stock markets of oil exporting and importing countries alike.
Original languageEnglish
Pages (from-to)223-229
Number of pages7
JournalQuarterly Review of Economics and Finance
Early online date22 Sept 2021
Publication statusPublished - 1 Nov 2021


  • contagion
  • intraday data
  • local correlation
  • oil
  • stock markets


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