Shock transmission and volatility spillover in stock and commodity markets: evidence from advanced and emerging markets

Gülin Vardar (), Yener Coskun () and Tezer Yelkenci ()
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Gülin Vardar: Izmir University of Economics
Tezer Yelkenci: Izmir University of Economics

Eurasian Economic Review, 2018, vol. 8, issue 2, No 4, 288 pages

Abstract: Abstract This paper employs a VAR-BEKK GARCH model to examine the shock transmission and volatility spillover (STVS) effects among daily stock market indices of the US, UK, France, Germany, Japan, Turkey, China, South Korea, South Africa and India, together with the five major commodity spot price—crude oil, natural gas, platinum, silver and gold—over the period 05 July, 2005 and 14 October, 2016, i.e., covering the pre-crisis, crisis and post global financial crisis periods. In the full period, the primary trend in advanced and emerging countries is the bidirectional STVS effects between stock and the commodity returns. However, the results also illustrate relatively less unilateral STVS effects from the commodity to stock returns, but significant unilateral STVS effects from the stock returns to the commodity returns in advanced and emerging countries. We also find more cases of significant STVS effects between commodity and stock markets in all countries during the crisis and post-crisis periods compared to the pre-crisis period. Therefore, it indicates that STVS effects are the new normal for stock and commodity markets, despite the efforts of central banks during post-global crisis period. In practical terms, our findings suggest that resource allocation decision between stocks and commodities should involve the analysis of the direction of the STVS effects in particular stock/commodity markets and cycles of the global economy.

Keywords: Volatility; Spillover; Shock transmission; Commodity; Crude oil; Stock market (search for similar items in EconPapers)
JEL-codes: F37 F42 Q02 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (29)

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DOI: 10.1007/s40822-018-0095-3

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