Comovements and Volatility Spillover in Commodity Markets
No hay miniatura disponible
Fecha
Autores
Título de la revista
ISSN de la revista
Título del volumen
Editor
Resumen
Descripción
This paper analyzes comovements and connectedness of commodity futures in
the past two decades. We apply dynamic conditional correlation model (DCC) to
capture time-varying dependence structure of a variety of commodities across different
sectors. We propose to estimate network connectedness of commodity markets
by the modeling framework of Diebold and Yilmaz (2014) that studies direction and
magnitude of volatility spillover using reduced-form vector autoregression (VAR)
models and generalized forecast error variance decomposition. We find that both
DCC and VAR models present consistent results: while comovements and connectedness
of commodity markets have dramatically increased during 2007-2009 financial
distress, they have returned to the pre-crisis levels after. We also find that recent
downward movement of commodity prices does not necessarily indicate stronger
connection between commodity markets, which poses challenges on recent studies
in commodity financialization.