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The good, the bad and the ugly relation between oil and commodities: An analysis of asymmetric volatility connectedness and portfolio implications

Debasish Maitra, Kousik Guhathakurta and Sang Hoon Kang

Energy Economics, 2021, vol. 94, issue C

Abstract: This study examines the direction and extent of asymmetric volatility connectedness between the oil and commodity markets, using five-minute interval data from the oil, natural gas, and 21 commodity futures markets. We also analyze the positive and negative volatility connectedness through network diagrams to determine the magnitude and strength of the volatility spillover. We suggest optimal portfolios for several oil-commodity pairs minimizing value-at-risk and conditional value-at-risk with higher hedge effectiveness. The results are of significant interest to investors and policymakers.

Keywords: Oil price; Commodity prices; Asymmetric volatility spillover; Portfolio implications (search for similar items in EconPapers)
JEL-codes: E52 E62 Q41 Q43 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:94:y:2021:i:c:s0140988320304011

DOI: 10.1016/j.eneco.2020.105061

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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