Modelling extreme risk spillovers in the commodity markets around crisis periods including COVID19

In this paper, we examine extreme spillovers among the realized volatility of various energy, metals, and agricultural commodities over the period from September 23, 2008, to June 1, 2020. Using high-frequency (5-min) price data on commodity futures, we compute daily realized volatility and then apply quantile-based connectedness measures. The results show that the connectedness measures estimated at the lower and upper quantiles are much higher than those estimated at the median, implying that realized volatility shocks circulate more intensely during extreme events relative to normal periods, which endangers the stability of the system of volatility connectedness under extreme events such as the COVID19 outbreak. There is evidence of a strong asymmetry between the behaviour of volatility spillovers in lower and upper quantiles, given that the connectedness measures estimated at the upper quantile are the highest. The main results are robust to rolling window size and other alternative choices. Our analyses matter to investors and policy makers who are concerned with the stability of commodity markets.

Rare earth and allied sectors in stock markets: extreme dependence of return and volatility

This study examines the dynamics of return and volatility connectedness between the rare earth stock index and the indexes of clean energy, consumer electronics, telecommunications, healthcare equipment, and aerospace & defence. Using daily data from 25 March 2010 to 25 August 2020, a quantile-based connectedness approach is applied to uncover both average and tail-based connectedness while considering the full sample period and the COVID-19 pandemic days. The results suggest that the interdependence among these indexes changes dramatically at the lower and upper quantiles, suggesting a strong influence of extreme market scenarios on both returns and volatility connectedness dynamics. Higher integration of sectoral indexes is observed during 2010-2012 and the COVID-19 pandemic period. Health care and telecommunication indexes have been consistent transmitters of return and volatility spillovers to other indexes during the full sample period. Consumer electronics and clean technology indexes switch their roles from a net receiver to a net transmitter during pandemic days. The rare earth remains on the recipient's side consistently. The findings indicate that the ongoing U.S.-China trade embargo has not impacted the return and volatility dynamics of the five sectoral indexes superseding the demand-driven dynamics for rare earth.

The hedge asset for BRICS stock markets: Bitcoin, gold or VIX

We compare the weak/strong hedging abilities of three alternative assets, namely bitcoin, gold and US VIX futures, against the downside movements in BRICS stock market indices. Results from the cross-quantilogram approach indicate that bitcoin and gold are weak hedges. Analysis from the recursive sampling shows that each of bitcoin, gold and VIX futures has a time-varying hedging role in some BRICS countries, which has been shaped by the COVID-19 outbreak. Results from the conditional diversification benefits show appealing roles for the three alternative assets for investors in BRICS stock markets. However, gold appears to have higher and more stable diversification benefits in China, especially during the COVID-19 outbreak. Conversely, VIX futures offer higher diversification benefits in Brazil, Russia, India and South Africa during the abrupt of the COVID-19 outbreak.