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Dynamic co-movement in major commodity markets during crisis periods: A wavelet local multiple correlation analysis

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  • Bouri, Elie
  • Nekhili, Ramzi
  • Todorova, Neda

Abstract

We study time-scale co-movement of returns and implied volatilities of oil, gold, wheat, and copper in a multivariate setting using the wavelet local multiple correlation (WLMC) approach. Daily data cover January 03, 2007 – August 08, 2022, including the global financial crisis, COVID-19 pandemic, and Russia-Ukraine war. The results show that the correlations across the commodities are heterogeneous, less stable in the short-term, and more pronounced in the long-term, and vary in sign and magnitude. Despite market instability, contagion is not clearly seen in either return or volatility, reflecting noise trading and the importance of the individual characteristics of commodities.

Suggested Citation

  • Bouri, Elie & Nekhili, Ramzi & Todorova, Neda, 2023. "Dynamic co-movement in major commodity markets during crisis periods: A wavelet local multiple correlation analysis," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003689
    DOI: 10.1016/j.frl.2023.103996
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    More about this item

    Keywords

    Returns and implied volatility; Wavelet local multiple correlation (WLMC); Commodities; Crude oil; Gold; COVID-19; Russia-Ukraine war;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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