Realized Volatility Spillovers between Energy and Metal Markets: A Time-Varying Connectedness Approach

Juncal Cunado, David Gabauer and Rangan Gupta
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Juncal Cunado: Department of Economics, University of Navarra, Pamplona, Spain

No 202180, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper analyzes the degree of dynamic connectedness between energy and metal commodity prices in the pre and post COVID-19 era, using the TVP-VAR based connectedness approach of Antonakakis et al. (2020). The results suggest that market interconnectedness slightly increased following the outbreak of COVID-19, although this increase was lower and less persistent than that observed after the Global Financial Crisis of 2008. Furthermore, we find that crude oil was the main transmitter of shocks during the period prior to COVID-19 while heating oil, gold and silver became the main transmitters of shocks during the COVID-19 pandemic. On the contrary, natural gas and palladium have been the main receivers of shocks during the whole sample period, making these two commodities attractive hedging and safe-haven options for investors during the pandemic crisis. The implications of our findings for portfolio diversification and energy transition policies are discussed.

Keywords: Realized volatilities; energy market; metal market; TVP-VAR; dynamic connectedness (search for similar items in EconPapers)
JEL-codes: C32 C50 G15 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2021-11
New Economics Papers: this item is included in nep-ene and nep-rmg
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Citations: View citations in EconPapers (4)

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Journal Article: Realized volatility spillovers between energy and metal markets: a time-varying connectedness approach (2024)
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