The Dynamic Volatility Connectedness Structure of Energy Futures and Global Financial Markets: Evidence From a Novel Time–Frequency Domain Approach

Ehsan Bagheri (), Seyed Babak Ebrahimi (), Arman Mohammadi (), Mahsa Miri () and Stelios Bekiros
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Ehsan Bagheri: K. N. Toosi University of Technology
Seyed Babak Ebrahimi: K. N. Toosi University of Technology
Arman Mohammadi: K. N. Toosi University of Technology
Mahsa Miri: Islamic Azad University

Computational Economics, 2022, vol. 59, issue 3, No 7, 1087-1111

Abstract: Abstract We consider directional volatility connectedness among energy markets and financial markets over time and frequencies simultaneously during the period 2007–2018. We utilize and expand Barunik and Krehlik (J Financ Econom 16:271-296, 2018) connectedness measurements using HVAR in order to achieve a better perspective of energy markets. Our results indicate that during a crisis, the connectedness among markets increases dramatically. Furthermore, our findings support that markets are mostly driven by short-term factors and are highly speculative. Among energy markets, Natural Gas Futures contribute the least to other markets in all time frames. Besides, London Gas Oil Futures and Heating Oil Futures collaborate. Currencies and Natural Gas Futures are suitable choices for portfolio managers to hedge their risks especially in the long run. The findings of this article can offer new insights to policymakers about the mechanism of connectedness among different markets and international investors.

Keywords: Frequency connectedness; Financial markets; Energy futures markets; Financial econometrics (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10614-021-10120-x

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