Deciphering volatility spillovers amidst crises: analyzing the interplay among commodities, equities and socially responsible investments during the COVID-19 shock and financial turbulence

Amine Ben Amar, Amir Hasnaoui, Nabil Boubrahimi, Ilham Dkhissi and Makram Bellalah ()
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Amir Hasnaoui: CERIIM - Centre de Recherche en Intelligence et Innovation Managériales - Excelia Group | La Rochelle Business School
Nabil Boubrahimi: UIT - Université Ibn Tofaïl
Ilham Dkhissi: UIR - Université Internationale de Rabat
Makram Bellalah: UPJV Économie et Gestion - UFR d'Économie et de Gestion - Université de Picardie Jules Verne - UPJV - Université de Picardie Jules Verne, LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne

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Abstract: This study aims to elucidate the volatility spillovers among commodities, equities and socially responsible investments, underpinning their dynamic correlations during the economic instability wrought by the COVID-19 pandemic and associated financial crises. Design/methodology/approach This research quantitatively analyzes volatility transmission across various financial assets from January 2005 to October 2020 by employing the Diebold and Yilmaz (2012) spillover index. The methodology incorporates a temporal examination to capture the evolution of volatility dependencies pre and post the emergence of COVID-19. Findings The findings indicate substantial volatility spillovers among the assets in question, aligning with the current financialisation of commodity markets and a rise in financial market integration. These spillovers also show variation over time. Notably, the interconnectedness among the assets intensifies during periods of stress. For instance, the total spillover index significantly surpassed 80% toward the end of January 2020, following the onset of the COVID-19 crisis. Furthermore, the results imply that financial markets appear to be segmented. Practical implications The findings afford investors a more comprehensive insight into both the character and scale of the interdependencies across a broad array of financial markets. Indeed, grasping the extent to which financial markets are segmented or integrated during times of stress and stability is crucial for investors. Such understanding is key to more accurately evaluating risks, diversifying investment portfolios and devising more efficient hedging strategies. Originality/value This study contributes to financial literature by offering a comprehensive investigation into the spillover effects across a diverse set of asset classes during an unprecedented global health crisis, filling a gap in existing research on market behavior against the backdrop of a pandemic-induced financial crisis.

Keywords: Volatility spillovers; Financial markets integration; Socially responsible investing; Commodity markets; Crisis dynamics; G11; G14; G15; Q02 (search for similar items in EconPapers)
Date: 2024-05-29
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Published in Journal of Risk Finance, 2024, ⟨10.1108/JRF-02-2023-0030⟩

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Journal Article: Deciphering volatility spillovers amidst crises: analyzing the interplay among commodities, equities and socially responsible investments during the COVID-19 shock and financial turbulence (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04643053

DOI: 10.1108/JRF-02-2023-0030

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