Price spillovers between rare earth stocks and financial markets

Juan Reboredo and Andrea Ugolini

Resources Policy, 2020, vol. 66, issue C

Abstract: We study price transmission between rare earth stocks and the base metals, gold, clean energy, oil and global MSCI stock markets. Using a Markov switching vector autoregressive model that accounts for different volatility regimes, our empirical findings reveal that price connectedness between rare earth (RE) and other stock markets differs across volatility regimes. Specifically, in a low-volatility regime: (a) RE stocks are linked to the base metals market, receiving and transmitting sizeable price spillovers, and (b) RE stocks are weakly connected with clean energy, gold, oil and general stock markets. In contrast, in a high-volatility regime, there is increased RE price co-movement with price oscillations in the clean energy, oil and general stock markets. These findings have implications for hedging risk associated with positions in RE companies using other financial assets.

Keywords: Rare earths; Financial markets; Price spillovers; Markov switching VAR (search for similar items in EconPapers)
JEL-codes: C32 G12 G15 Q02 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:66:y:2020:i:c:s0301420719308311

DOI: 10.1016/j.resourpol.2020.101647

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