Estimating the connectedness of commodity futures using a network approach
Libing Fang and
Journal of Futures Markets, 2020, vol. 40, issue 4, 598-616
Using a network approach of variance decompositions, we measure the connectedness of 18 commodity futures and characterize both static and dynamic connectedness. Our results show that metal futures are net transmitters of shocks to other futures, and agricultural futures are vulnerable to shocks from the others. Furthermore, almost two‐thirds of the volatility uncertainty for commodity futures are due to the connectedness of shocks across the futures market. Dynamically, we find connectedness always increases in times of turmoil. An analysis of connectedness networks suggests that investors could be forewarned that the connectedness of various classes of futures could threaten their portfolios.
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:40:y:2020:i:4:p:598-616
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