TY - JOUR
T1 - Volatility spillovers between strategic commodity futures and stock markets and portfolio implications: Evidence from developed and emerging economies
T2 - Evidence from developed and emerging economies
AU - Mensi, Walid
AU - Muhammad Shafiullah
AU - Xuan Vinh Vo
AU - Sang Hoon Kang
N1 - Publisher Copyright:
© 2021
PY - 2021
Y1 - 2021
N2 - This study examines the short-, intermediate-, and long-term volatility spillovers between developed (Australia, Canada, France, Germany, Japan, UK, and US) and emerging BRICS (Brazil, Russia, China, India, and South Africa) stock markets and strategic commodity futures markets (oil and gold). Using Baruník and Křehlík's (2018) methodology, we find evidence of time-varying volatility spillovers, which are intensified under major events. Moreover, the total volatility spillovers are higher in the short term than both the intermediate and long terms. A portfolio management analysis reveals that a mixed portfolio (commodity and stock markets) provides a higher level of hedging effectiveness for both emerging and developed markets. In addition, the hedging effectiveness in BRICS markets is more pronounced than in developed markets irrespective of frequencies. The hedging effectiveness is also higher using gold than oil and under the short term rather than both the intermediate and long terms. These results provide important implications for risk management and funds allocation.
AB - This study examines the short-, intermediate-, and long-term volatility spillovers between developed (Australia, Canada, France, Germany, Japan, UK, and US) and emerging BRICS (Brazil, Russia, China, India, and South Africa) stock markets and strategic commodity futures markets (oil and gold). Using Baruník and Křehlík's (2018) methodology, we find evidence of time-varying volatility spillovers, which are intensified under major events. Moreover, the total volatility spillovers are higher in the short term than both the intermediate and long terms. A portfolio management analysis reveals that a mixed portfolio (commodity and stock markets) provides a higher level of hedging effectiveness for both emerging and developed markets. In addition, the hedging effectiveness in BRICS markets is more pronounced than in developed markets irrespective of frequencies. The hedging effectiveness is also higher using gold than oil and under the short term rather than both the intermediate and long terms. These results provide important implications for risk management and funds allocation.
KW - Commodity
KW - Connectedness network
KW - Portfolio risk
KW - Stock markets
KW - Time-frequency connectedness
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U2 - 10.1016/j.resourpol.2021.102002
DO - 10.1016/j.resourpol.2021.102002
M3 - Article
SN - 0301-4207
VL - 71
JO - Resources Policy
JF - Resources Policy
M1 - 102002
ER -