Has COVID‑19 changed the stock return‑oil price predictability pattern?

摘要

In this paper,we examine if COVID-19 has impacted the relationship between oil prices and stock returns predictions using daily Japanese stock market data from 01/04/2020 to 03/17/2021.We make a novel contribution to the literature by testing whether the COVID-19 pandemic has changed this predictability relationship.Employing an empirical model that controls for seasonal effects,return-related control variables,heteroskedasticity,persistency,and endogeneity,we demonstrate that the influence of oil prices on stock returns declined by around 89.5%due to COVID-19.This implies that when COVID-19 reduced economic activity and destabilized financial markets,the influence of oil prices on stock returns declined.This finding could have implications for trading strategies that rely on oil prices.