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

Elie Bouri, Ramzi Nekhili and Neda Todorova

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: 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.

Keywords: Returns and implied volatility; Wavelet local multiple correlation (WLMC); Commodities; Crude oil; Gold; COVID-19; Russia-Ukraine war (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003689

DOI: 10.1016/j.frl.2023.103996

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