Does COVID-19 Crisis Affects the Spillover of Oil Market’s Return and Risk on Thailand’s Sectoral Stock Return?: Evidence from Bivariate DCC GARCH-in-Mean Model

Napon Hongsakulvasu, Chatchai Khiewngamdee, Asama Liammukda


This paper utilizes a bivariate DCC GARCH-in-Mean model to capture the spillover of Singapore’s oil market risk and return on Thailand’s stock market return by using daily data of 11 stock indices include 1 market level, 8 industry levels and 2 sector levels. For the period before COVID-19 appearance from October 5, 2016 to October 31, 2019, we found that Singapore’s oil market return had a significant positive effect on the return of Resources, Industrials, Petrochemicals and Chemicals, Energy and Utilities and Stock Exchange of Thailand while Singapore’s oil market risk had a significant negative effect on Consumer Products, Industrials and Petrochemicals and Chemicals. For the period during COVID-19 crisis from November 1, 2019 to June 8, 2020, we found that Singapore’s oil market return had a significant positive effect on every category of Thailand’s stock return while Singapore’s oil market risk had a significant negative effect on Financials, Consumer Products, Agro and Food Industry, Property and Construction, Services and Stock Exchange of Thailand. We found that the spillover of Singapore’s oil price return on Thailand’s sectoral stock return became aggressively higher during COVID-19 crisis. According to our results, we can conclude that the investors consider Singapore’s Oil market and Thailand’s stock market as a complimentary investment product in their portfolio. Moreover, the investors consider Singapore’s oil market volatility as a signal of incoming recession or crisis to withdraw their investment from Thailand’s stock market. In addition, our study found the evidence that the daily changing of COVID-19 anxiousness had a significant negative effect on every category of Thailand’s stock return. The DCC estimation results showed that the correlation between Singapore’s oil market return and Thailand’s sectoral stock return was varying over time and became more fluctuated during COVID-19 crisis.


bivariate GARCH in mean model; COVID-19; dynamic conditional correlation; Singapore's oil market; Thailand's stock market

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