Market responses to spillovers in the energy commodity markets: Evaluating short-term vs. long-term effects and business-as-usual vs. distressed phases

Mattia Chiappari, Francesco Scotti and Andrea Flori

International Review of Financial Analysis, 2024, vol. 96, issue PB

Abstract: We study how market spillovers propagate within a comprehensive system of energy commodities by employing spillover analysis in the time and frequency domains. Raw materials dominate the system’s connectedness, behaving as net transmitters of spillovers. However, the dynamic analysis shows that downstream commodities may also act as net transmitters but only in a few short phases. Importantly, relevant energy market episodes generate more substantial spillovers, while lower system connectedness is observed during events primarily affecting other sectors. Our main findings are substantially invariant to a series of robustness checks. These results also hold when analyzing the distribution’s tails in a quantile framework that we introduce to study distressed periods. Finally, we examine a broad frequency spectrum and find high efficiency in this system, with substantial spillovers absorbed in less than two days for all commodities.

Keywords: Spillovers; Energy sector; Commodities; Connectedness (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924005970

DOI: 10.1016/j.irfa.2024.103665

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