Motivated by the COVID-19 pandemic, we examine the role of uncertainty due to infectious diseases in predicting energy market volatility using the new dataset on Equity Market Volatility-Infectious Diseases (EMV-ID). We find that the new measure of market uncertainty is a good predictor of energy market volatility in both in-sample and out-of-sample tests. These results have implications for portfolio diversification strategies, which we set aside for future research.
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Salisu et al. (2020) studied this question.
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