Riding the storm: AI-driven spillover effects across technology, commodities, and conventional markets

Muhammad Abubakr Naeem, Raazia Gul, Nadia Arfaoui, Walid Bakry and Muhammad Ishaq Bhatti

Pacific-Basin Finance Journal, 2025, vol. 93, issue C

Abstract: The rising prevalence of artificial intelligence emphasizes the need to understand the complex dynamics and risks within data-driven environments, particularly in light of the challenges related to the ‘black box’ nature of many AI systems. This study delves into the downside risk contagion between innovative technology assets (e.g., AI, Metaverse, Fintech), energy markets (e.g., oil, natural gas), gold, and conventional markets (e.g., stocks, bonds) from July 2018 to December 2023. Using advanced econometric techniques, the research uncovers critical insights into market behavior during turbulent times. The results reveal a significant increase in market connectedness during crises, particularly during the COVID-19 outbreak. Notably, strong connectedness is observed among innovative technology sectors, while weaker links are evident between bond and technology markets. Furthermore, natural gas exhibits weak connectivity with other markets, highlighting its potential for diversification. Another key finding shows that natural gas and Bitcoin emerge as the riskiest assets, while gold, AI, and Metaverse maintain more stable tail risk profiles over time. These findings offer valuable insights for investors, financial advisors, and portfolio managers navigating volatile market environments.

Keywords: Downside risk; Artificial intelligence; Cryptocurrency; Metaverse; Commodities (search for similar items in EconPapers)
JEL-codes: G10 G11 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25001829

DOI: 10.1016/j.pacfin.2025.102845

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