Is connectedness between commodity volatility indices and G-7 stock market returns the same across return quantiles?

Waqas Hanif, Rim El Khoury and Sinda Hadhri

Journal of Multinational Financial Management, 2025, vol. 79, issue C

Abstract: This study examines the connectedness and spillover effects among G7 stock markets, oil and gold volatilities from January 1, 2017, to June 16, 2022. By employing an in-quantile spillover approach, the study contributes to the existing literature by providing a comprehensive analysis of the linkages between these markets. The findings reveal that spillover effects are highly dynamic and vary significantly across different quantiles of the return distribution. During periods of market turbulence—such as the Covid-19 pandemic, trade tensions, and geopolitical conflicts—spillover intensity increases, indicating heightened market interdependence. The Japanese stock market and Gold volatility index (GVX) consistently act as net recipients of shocks, whereas the stock markets of Canada, France, Germany, Italy, the UK, and the USA serve as net transmitters. While long-term diversification opportunities appear limited, gold and oil exhibit effective hedging properties for short-term investors across various market conditions. From a policy perspective, these findings underscore the importance of monitoring market interdependencies, particularly during crisis periods. Policymakers should implement coordinated strategies to mitigate systemic risks in financial markets, especially in times of heightened uncertainty. Investors should consider short-term hedging strategies using gold and oil to minimize risk exposure during market downturns. Furthermore, financial regulators in G7 countries should enhance surveillance mechanisms to preempt excessive spillovers that may threaten financial stability.

Keywords: Spillover; G7 stock markets; oil; gold; quantile-based analysis (search for similar items in EconPapers)
JEL-codes: C32 G01 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:79:y:2025:i:c:s1042444x25000258

DOI: 10.1016/j.mulfin.2025.100921

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