Volatility returns with vengeance: Financial markets vs. commodities

Sofiane Aboura and Julien Chevallier
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Sofiane Aboura: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: To assess how financial markets and commodities are inter-related, this paper introduces a ‘volatility surprise' component into the asymmetric DCC with one exogenous variable (ADCCX) framework. We develop an econometric model in which returns and volatility allow to influence pairs of assets, and derive several case studies linking commodities to stocks, bonds and currencies from 1983 to 2013. The innovative feature of our model is that these volatility spillovers are modeled consistently within the correlation dynamics of the ADCCX model. We find evidence that return and volatility spillovers do exist between commodity and financial markets and that in turn, their relative impact on each other is very substantial.

Keywords: Volatility spillovers; Financial Markets; Commodities; ADCCX; Bonds; Stocks (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (21)

Published in Research in International Business and Finance, 2015, 33, pp.334-354. ⟨10.1016/j.ribaf.2014.04.003⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01529747

DOI: 10.1016/j.ribaf.2014.04.003

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