Comovement and spillover among energy markets: A Comparison across different crisis periods

Abstract

We compare the comovement and spillover between returns of six developed energy markets during different crisis periods using wavelet multiple correlation and wavelet multiple cross-correlation. The considered countries include Canada, France, Italy, Japan, the UK, and the US for a period from July 5, 1999 to July 3, 2021. The results reveal strong correlations between the markets of France, Italy, the US, and the UK across different scales. More specifically, the energy markets of France and Italy show pronounced correlation across lower frequencies, while the energy market of Canada is a prominent net transmitter, with it having the most influence on the connectedness of all other markets. However, the Japanese and Canadian energy markets can provide diversification benefits when combined with other markets. These findings have significant implications for policymakers and investors in terms of how best to invest during various crisis periods.