Financial Market Stress and Commodity Returns: A Dynamic Approach

Ramesh Adhikari () and Kyle J. Putnam
Additional contact information
Ramesh Adhikari: School of Business, Cal Poly Humboldt, Arcata, CA 95521, USA
Kyle J. Putnam: School of Business, Linfield University, McMinnville, OR 97128, USA

Commodities, 2024, vol. 3, issue 1, 1-23

Abstract: This paper examines the relationship between commodity index returns and the Office of Financial Research Financial Stress Index (OFR FSI). Utilizing the S&P GSCI and its five sub-indices (agriculture, livestock, energy, industrial metals, and precious metals), we find that the causal relationship between financial market stress and commodity index returns is conditional on the sample period examined and the methodology employed. We also note that stress in financial markets has a negative relationship with commodity index returns during low commodity return states; however, during high commodity return states, financial market stress exhibits a positive relationship with commodity index returns. Our findings highlight the importance of considering a time-varying framework for analyzing commodity return dynamics.

Keywords: financial market stress; commodity index returns; S&P GSCI index; office of financial research financial stress index; time-varying Granger causality; Markov-switching (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2813-2432/3/1/4/pdf (application/pdf)
https://www.mdpi.com/2813-2432/3/1/4/ (text/html)

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:gam:jcommo:v:3:y:2024:i:1:p:4-61:d:1325163

Access Statistics for this article

Commodities is currently edited by Ms. Wendy Yu

More articles in Commodities from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().