Time Varying Effects of Fuel Prices on Stock Market Returns During COVID-19 Outbreak

This article explores the impact of fuel price movements on the stock market return of 2020 during the Covid-19 disruptions. In the study, a time-varying parameter VAR model was used to examine a time-varying causal association between oil prices and stock market returns. Data used in this study was secondary monthly data from seven selected stock market indices that were deemed representative of developed and emerging economies globally. This research makes use of a novel quantile-causality approach to capture the fluctuations of these markets under Covid-19's varying market conditions. The study further utilises the entropy transfer approach to capture the peculiar nonlinearity of the data series. The results indicate a high information flow from fuel prices to the FTSE-100, Pacific, and European stock indexes, but not the other way around. The results showed that, for the FTSE-100 and the European region, there is a two-way information flow between equities and natural gas, and vice versa. However, a one-way information flow was established from the stock market to the Pacific and emerging economies.