 Financial Contagion of the Commodity Markets from the Stock Market during Pandemic and New Sanctions ShocksMarina Yu. Malkina Journal of Applied Economic Research, 2024, vol. 23, issue 2, 452-475 Abstract: In the context of financial globalization, there is an increasing transmission of global turbulence between different markets, which enhances overall financial instability. The purpose of this study is to identify the financial contagion of the commodity market from the stock market in the 1920s. The research hypothesis is that contagion manifested itself during the period of pandemic shocks of 2020-2021 and new sanctions shocks of 2022-2023. Based on 2016-2023 data on the intersessional average daily return of the S&P GLOBAL 100 index and 22 commodity futures, DCC GARCH models are built. Significant increases in these correlations during periods of external shocks indicate potential contagion. A dynamic Student's t-test for the equality of correlations in the pre-shock period and in the sliding window within the shock and inter-shock periods is used to definitively prove the presence or absence of contagion. The study confirmed the contagion of 22 commodity markets from the stock market of varying strength and duration, both during the pandemic and new sanctions shocks. It proved that the metals market, especially the gold market, was the most susceptible to contagion during the period under review. Copper and zinc turned out to be risk dampers during the period of new sanctions. Among food products, the sugar market has demonstrated the greatest propensity to contagion, but during a period of relative stability it has proven its ability to mitigate systemic risks. A number of agricultural commodities (e.g., soybeans and soybean products, corn, wheat), as well as Brent oil, have shown relative resistance to contagion and are recommended as hedging tools. The results and conclusions of the study can be useful to investors in managing optimal portfolios, and to the state when adjusting anti-crisis financial policy during the period of external shocks affecting the economy. Keywords: cross-market contagion effects; commodity futures; S&P GLOBAL 100 index; DCC GARCH model; COVID-19 pandemic; sanctions. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnjaer:v:23:y:2024:i:2:p:452-475 DOI: 10.15826/vestnik.2024.23.2.018 Access Statistics for this article Journal of Applied Economic Research is currently edited by Igor Mayburov More articles in Journal of Applied Economic Research from Graduate School of Economics and Management, Ural Federal University Contact information at EDIRC. |
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