Commodity and equity markets: Volatility and return spillovers

Detalhes bibliográficos
Autor(a) principal: Pinho, Carlos
Data de Publicação: 2022
Outros Autores: Maldonado, Isabel
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/11328/4610
Resumo: The present paper provides an empirical analysis of the relationship between shocks to commodity markets and stock markets. By employing a total volatility connectedness measure, we study the relationship between shocks to oil, gold, copper, and agricultural commodity markets and emerging and developed stock markets. We conduct a connectivity analysis in the time and frequency domain to quantify market linkages using volatility spillovers over the period from 2004 to 2021. In addition, we analyze the spillovers of returns in these markets over the same period. The results suggest that both on volatility and returns spillovers, slightly more than 35% of the total variance of forecast errors is explained by shocks to markets during the period January 2004 to June 2021. We also show that, in terms of both volatility and returns, the contribution of equity market shocks to other markets is substantially more important than that of commodities; however, our analysis reveals that the total link between market returns is larger in the short run than in the long run, while in the case of volatility, the long-run frequencies concentrate the market link. Additionally, we use dynamic analysis to assess both the time evolution of total connectivity and all directional partial connectivity between markets. Our results show that both volatility and return linkages change significantly over time and that a set of events has a significant impact on them.
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spelling Commodity and equity markets: Volatility and return spilloversSpillover effectVolatility connectednessVariance decompositionVolatilityThe present paper provides an empirical analysis of the relationship between shocks to commodity markets and stock markets. By employing a total volatility connectedness measure, we study the relationship between shocks to oil, gold, copper, and agricultural commodity markets and emerging and developed stock markets. We conduct a connectivity analysis in the time and frequency domain to quantify market linkages using volatility spillovers over the period from 2004 to 2021. In addition, we analyze the spillovers of returns in these markets over the same period. The results suggest that both on volatility and returns spillovers, slightly more than 35% of the total variance of forecast errors is explained by shocks to markets during the period January 2004 to June 2021. We also show that, in terms of both volatility and returns, the contribution of equity market shocks to other markets is substantially more important than that of commodities; however, our analysis reveals that the total link between market returns is larger in the short run than in the long run, while in the case of volatility, the long-run frequencies concentrate the market link. Additionally, we use dynamic analysis to assess both the time evolution of total connectivity and all directional partial connectivity between markets. Our results show that both volatility and return linkages change significantly over time and that a set of events has a significant impact on them.MDPI - Multidisciplinary Digital Publishing Institute2023-01-06T15:12:18Z2022-07-19T00:00:00Z2022-07-19info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/11328/4610eng2813-2432 (Electronic)https://doi.org/10.3390/commodities1010003Pinho, CarlosMaldonado, Isabelinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-06-15T02:13:18ZPortal AgregadorONG
dc.title.none.fl_str_mv Commodity and equity markets: Volatility and return spillovers
title Commodity and equity markets: Volatility and return spillovers
spellingShingle Commodity and equity markets: Volatility and return spillovers
Pinho, Carlos
Spillover effect
Volatility connectedness
Variance decomposition
Volatility
title_short Commodity and equity markets: Volatility and return spillovers
title_full Commodity and equity markets: Volatility and return spillovers
title_fullStr Commodity and equity markets: Volatility and return spillovers
title_full_unstemmed Commodity and equity markets: Volatility and return spillovers
title_sort Commodity and equity markets: Volatility and return spillovers
author Pinho, Carlos
author_facet Pinho, Carlos
Maldonado, Isabel
author_role author
author2 Maldonado, Isabel
author2_role author
dc.contributor.author.fl_str_mv Pinho, Carlos
Maldonado, Isabel
dc.subject.por.fl_str_mv Spillover effect
Volatility connectedness
Variance decomposition
Volatility
topic Spillover effect
Volatility connectedness
Variance decomposition
Volatility
description The present paper provides an empirical analysis of the relationship between shocks to commodity markets and stock markets. By employing a total volatility connectedness measure, we study the relationship between shocks to oil, gold, copper, and agricultural commodity markets and emerging and developed stock markets. We conduct a connectivity analysis in the time and frequency domain to quantify market linkages using volatility spillovers over the period from 2004 to 2021. In addition, we analyze the spillovers of returns in these markets over the same period. The results suggest that both on volatility and returns spillovers, slightly more than 35% of the total variance of forecast errors is explained by shocks to markets during the period January 2004 to June 2021. We also show that, in terms of both volatility and returns, the contribution of equity market shocks to other markets is substantially more important than that of commodities; however, our analysis reveals that the total link between market returns is larger in the short run than in the long run, while in the case of volatility, the long-run frequencies concentrate the market link. Additionally, we use dynamic analysis to assess both the time evolution of total connectivity and all directional partial connectivity between markets. Our results show that both volatility and return linkages change significantly over time and that a set of events has a significant impact on them.
publishDate 2022
dc.date.none.fl_str_mv 2022-07-19T00:00:00Z
2022-07-19
2023-01-06T15:12:18Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/11328/4610
url http://hdl.handle.net/11328/4610
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv 2813-2432 (Electronic)
https://doi.org/10.3390/commodities1010003
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv MDPI - Multidisciplinary Digital Publishing Institute
publisher.none.fl_str_mv MDPI - Multidisciplinary Digital Publishing Institute
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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institution RCAAP
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