Fair-weather Friends? Sector-specific volatility connectedness and transmission

Pan Liu, Gabriel Power and Dmitry Vedenov

International Review of Economics & Finance, 2021, vol. 76, issue C, 712-736

Abstract: Investment portfolio performance can improve with the addition of alternative assets such as commodities or by using styles such as sector investing. How volatility is transmitted between individual commodities and specific industry sectors, however, is not well understood. The dynamics of volatility transmission matters for risk management and asset allocation, given increases in commodity-equity correlations. We investigate the dynamics of volatility transmission and connectedness over 1/1999-12/2016 using data on futures for crude oil, gold, copper and corn as well as six industry SPDRs (Standard and Poor's Depository Receipts). We find that Financials and Technology are consistently the strongest volatility transmitters, while Consumer Durables and commodities are usually net receivers. Gold and corn appear to be more insulated from volatility transmission. All sectors and assets show time variation in net volatility transmission. Most sectors and indexes show reversals of net volatility transmission during market downturns or financial crises.

Keywords: Volatility; Connectedness; Transmission; Industry; Sector; SPDR; Conditional; Crisis; Commodities (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056021001301
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:76:y:2021:i:c:p:712-736

DOI: 10.1016/j.iref.2021.06.004

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().