Crude Oil Prices and Crypto-Assets: What Are the Effects of COVID-19 Pandemic?

Abstract

The current global COVID-19 pandemic is adversely affecting the oil market (West Texas Intermediate) and crypto-assets markets. This paper empirically investigates the extent to which interdependence in markets may be driven by COVID-19 effects. We fit copulas to pairs of before and after returns, analyze the observed changes in the dependence structure, and discuss asymmetries on the propagation of crisis. We also use the findings to construct portfolios possessing desirable expected behavior. We find that the dependence structure changes significantly after the global pandemic providing valuable information on how COVID- 19 crisis affects inter-dependencies. The results also prove the intrinsic characteristic of the gold as a safe haven.

Keywords: WTI; Crypto-assets; COVID-19 pandemic; Co-movement; Safe-haven

JEL Classification: C58; G01