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On the links between stock and commodity markets' volatility

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  • Anna Creti
  • Marc Joëts
  • Valérie Mignon

Abstract

This paper investigates the links between price returns for 25 commodities and stocks over the period from January 2001 to November 2011, by paying a particular attention to energy raw materials. Relying on the dynamic conditional correlation (DCC) GARCH methodology, we show that the correlations between commodity and stock markets evolve through time and are highly volatile, particularly since the 2007-2008 financial crisis. The latter has played a key role, emphasizing the links between commodity and stock markets, and underlining the financialization of commodity markets. At the idiosyncratic level, a speculation phenomenon is highlighted for oil, coffee and cocoa, while the safe-haven role of gold is evidenced.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2012-20.

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Date of creation: Oct 2012
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Handle: RePEc:cii:cepidt:2012-20

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Keywords: commodities; stock market; financial crisis; volatility; correlations; DCC-GARCH;

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References

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