Dynamic co-movement in major commodity markets during crisis periods: A wavelet local multiple correlation analysis

We study time-scale co-movement of returns and implied volatilities of oil, gold, wheat, and copper in a multivariate setting using the wavelet local multiple correlation (WLMC) approach. Daily data cover January 03, 2007 – August 08, 2022, including the global financial crisis, COVID-19 pandemic, and Russia-Ukraine war. The results show that the correlations across the commodities are heterogeneous, less stable in the short-term, and more pronounced in the long-term, and vary in sign and magnitude. Despite market instability, contagion is not clearly seen in either return or volatility, reflecting noise trading and the importance of the individual characteristics of commodities.

Quantile connectedness and spillovers analysis between oil and international REIT markets

We examine the quantile return spillovers between oil and international REIT markets (Australia, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Netherlands, New Zealand, Singapore, UK, and US). Using a quantile connectedness approach, we show that the extreme oil–REIT nexus is heterogeneous and asymmetric. The return spillover is stronger at lower quantiles. Furthermore, the oil market acts as a net transmitter of return spillovers to the REIT markets during times of downside return and a net receiver of spillovers during upside returns. The hedging strategy is expensive during COVID-19, with oil offering the highest hedging effectiveness for Hong Kong. Gel classification : G14, F36, C40

Multiscale spillovers and connectedness between gold, copper, oil, wheat and currency markets

This paper examines the time-frequency return and volatility spillovers between major commodity futures (copper, crude oil, gold, and wheat) and currency markets (British pound, Canadian dollar, Euro, Japanese yen, Swedish krona, and Swiss franc) using the methodologies by Diebold and Yılmaz (2012) and Baruník and Křehlík (2018). The results show that the spillover between markets under investigation is time-varying, asymmetric, and crisis-sensitive. Furthermore, short-term return spillovers dominate the intermediate- and long-term spillovers. In contrast, long-term volatility spillovers constitute the principal proportion of the total volatility spillovers. COVID-19 and GFC intensify more the long-term volatility spillovers than short- and medium-terms. Wheat is the better portfolio diversfier among the four commodities irrespective of the investment horizons. Liquidity shocks show a stronger impact on the return and volatility spillover strengths than the economic policy uncertainty and volatility index. The effect of liquidity shocks on return is a sizable increase in connectedness in the short-term than in both medium- and long-terms. Our findings have significant implications for currency investors and policymakers.

Oil and precious metals: Volatility transmission, hedging, and safe haven analysis from the Asian crisis to the COVID-19 crisis

This paper examines the volatility transmission between crude oil and four precious metals (i.e., gold, silver, platinum, and palladium) and investigates whether oil can be considered as a hedge or safe-haven asset against four precious metals. Our empirical analysis reveals several important findings. First, we determine that the volatility transmission was time-varying and that influence from the Asian crisis, the bursting of the dot-com bubble, the 2008 global financial crisis, the recent oil-price crash, and COVID-19 alternated between negative and positive values over the entire studied period. We further conclude that Brent oil is a diversifier and a weak safe haven for precious metals;and thus, that a combined portfolio composed of Brent-oil and precious-metals futures yields better hedging effectiveness. These findings indicate that oil futures are a useful investment that reduces downside risks and strengthens diversification benefits in portfolio risk management.