Author
Sang Hoon Kang, Ron McIver and Seong-Min Yoon (smyoon@pusan.ac.kr)
Energy Economics, 2017, vol. 62, issue C, 19-32
Abstract: This paper examines spillover effects among six commodity futures markets – gold, silver, West Texas Intermediate crude oil, corn, wheat, and rice – by employing the multivariate DECO-GARCH model and the spillover index. Specifically, we investigate the dynamics of return and volatility spillover indices to reveal the intensity and direction of transmission during the recent global financial and European sovereign debt crises. Our empirical results are as follows. First, we estimate a positive equicorrelation between commodity futures market returns and find that it increased sharply during the crises. This effect can persist during periods of economic and financial turmoil, diminishing the benefits of international portfolio diversification for investors. Second, we identify bidirectional return and volatility spillovers across commodity futures markets, and find more pronounced trends in their levels in the post-crisis period. This indicates the strong impact of spillovers during crisis periods. Third, both gold and silver are information transmitters to other commodity futures markets, while the remaining four commodity futures investigated were receivers of spillovers during recent periods of financial stress. Finally, we analyse the optimal portfolio weights and time-varying hedge ratios between metal and other commodities futures markets. Overall, our findings provide new insights into channels of information transmission, which may improve investment decisions and inform portfolio investors' trading strategies.
Keywords: Dynamic spillover; Financial crisis; Directional and net spillover index; Multivariate DECO-GARCH model; Time-varying hedge ratio (search for similar items in EconPapers)
JEL-codes: C58 G11 G14 Q47 (search for similar items in EconPapers)
Date: 2017
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Energy Economics is currently edited by R. S. J. Tol and J. P. Weyant
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http://econpapers.repec.org/article/eeeeneeco/v_3a62_3ay_3a2017_3ai_3ac_3ap_3a19-32.htm
Sang Hoon Kang, Ron McIver and Seong-Min Yoon (smyoon@pusan.ac.kr)
Energy Economics, 2017, vol. 62, issue C, 19-32
Abstract: This paper examines spillover effects among six commodity futures markets – gold, silver, West Texas Intermediate crude oil, corn, wheat, and rice – by employing the multivariate DECO-GARCH model and the spillover index. Specifically, we investigate the dynamics of return and volatility spillover indices to reveal the intensity and direction of transmission during the recent global financial and European sovereign debt crises. Our empirical results are as follows. First, we estimate a positive equicorrelation between commodity futures market returns and find that it increased sharply during the crises. This effect can persist during periods of economic and financial turmoil, diminishing the benefits of international portfolio diversification for investors. Second, we identify bidirectional return and volatility spillovers across commodity futures markets, and find more pronounced trends in their levels in the post-crisis period. This indicates the strong impact of spillovers during crisis periods. Third, both gold and silver are information transmitters to other commodity futures markets, while the remaining four commodity futures investigated were receivers of spillovers during recent periods of financial stress. Finally, we analyse the optimal portfolio weights and time-varying hedge ratios between metal and other commodities futures markets. Overall, our findings provide new insights into channels of information transmission, which may improve investment decisions and inform portfolio investors' trading strategies.
Keywords: Dynamic spillover; Financial crisis; Directional and net spillover index; Multivariate DECO-GARCH model; Time-varying hedge ratio (search for similar items in EconPapers)
JEL-codes: C58 G11 G14 Q47 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988316303577
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text
Persistent link: http://EconPapers.repec.org/RePEc:eee:eneeco:v:62:y:2017:i:c:p:19-32
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol and J. P. Weyant
More articles in Energy Economics from Elsevier
Series data maintained by Dana Niculescu (repec@elsevier.com).
For further information log on website :
http://econpapers.repec.org/article/eeeeneeco/v_3a62_3ay_3a2017_3ai_3ac_3ap_3a19-32.htm
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