Volatility spillovers between strategic commodity futures and stock markets and portfolio implications: Evidence from developed and emerging economies
Xuan Vinh Vo and
Sang Hoon Kang
Resources Policy, 2021, vol. 71, issue C
This study examines the short-, intermediate-, and long-term volatility spillovers between developed (Australia, Canada, France, Germany, Japan, UK, and US) and emerging BRICS (Brazil, Russia, China, India, and South Africa) stock markets and strategic commodity futures markets (oil and gold). Using Baruník and Křehlík's (2018) methodology, we find evidence of time-varying volatility spillovers, which are intensified under major events. Moreover, the total volatility spillovers are higher in the short term than both the intermediate and long terms. A portfolio management analysis reveals that a mixed portfolio (commodity and stock markets) provides a higher level of hedging effectiveness for both emerging and developed markets. In addition, the hedging effectiveness in BRICS markets is more pronounced than in developed markets irrespective of frequencies. The hedging effectiveness is also higher using gold than oil and under the short term rather than both the intermediate and long terms. These results provide important implications for risk management and funds allocation.
Keywords: Time-frequency connectedness; Stock markets; Commodity; Connectedness network; Portfolio risk (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:71:y:2021:i:c:s0301420721000192
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