Revisiting the pricing impact of commodity market spillovers on equity markets

Francisco Pinto-Ávalos, Michael Bowe and Stuart Hyde
Authors registered in the RePEc Author Service: Francisco Pinto Avalos

Journal of Commodity Markets, 2024, vol. 33, issue C

Abstract: This paper revisits the dynamics of pricing relationships between commodity and equity markets in a sample of commodity-exporting economies between 2000–2023. We confirm the correlation between these asset prices increases around episodes of financial distress. Prior research attributes this increase to the effects of contagion initiated by commodity price shocks. However, we find that after controlling for the effect of time varying risk aversion and investor sentiment, there is no evidence that the documented correlation increase originates from commodity market shocks. Indeed, we are unable to reject the hypothesis of no contagion. We maintain that controlling for the influence of time varying risk aversion and investor sentiment, together with other factors which potentially cause common variation across price movements in commodity and equity markets, is essential to accurately capturing the relationship between asset prices in these markets.

Keywords: Commodities; Equities; Financial contagion; Risk aversion; Investor sentiment (search for similar items in EconPapers)
JEL-codes: C32 G01 G15 Q02 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:33:y:2024:i:c:s2405851323000594

DOI: 10.1016/j.jcomm.2023.100369

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