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Portfolio rebalancing in times of stress: Capital markets vs. Commodities

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  • Rui Manuel Teixeira Dias

    (School of Business and Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal)

  • Nicole Rebolo Horta

    (School of Business and Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal)

  • Mariana Chambino

    (School of Business and Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal)

Abstract

In light of the events of 2020 and 2022, this study aims to examine the co-movements between the capital markets of the Netherlands (AEX), France (CAC 40), Germany (DAX 30), the United Kingdom (FTSE 100), Italy (FTSE MIB), Spain (IBEX 35), Russia (IMOEX), and spot prices of crude oil (WTI), silver (XAG), gold (XAU), and platinum (XPT) from January 1, 2018 to December 31, 2022. The purpose of this analysis is to answer the following research question: (i) Did the events of 2020 and 2022 increase the shocks between stock markets and WTI, XAG, XAU, and XPT prices? The findings indicate that time series do not follow a normal distribution and are stationary. In response to the question of investigation, we found that during the Tranquil period, it was possible to verify the existence of 28 causal relationships (out of 110 possibilities). During the stress period, there was a very significant increase in the number of causal relationships between the market pairs under analysis (62 causal relationships out of 110 possibilities), including a relative increase in the influence of commodities on capital markets and capital markets on commodities. These findings show that during the events of 2020 and 2022, capital markets and commodities significantly accentuated their co-movements among themselves, indicating that alternative markets such as WTI, XAG, XAU, and XPT do not provide safe-haven properties. These results have implications for portfolio diversification during times of global economic uncertainty.

Suggested Citation

  • Rui Manuel Teixeira Dias & Nicole Rebolo Horta & Mariana Chambino, 2023. "Portfolio rebalancing in times of stress: Capital markets vs. Commodities," Journal of Economic Analysis, Anser Press, vol. 2(1), pages 63-76, March.
    • Handle: RePEc:bba:j00001:v:2:y:2023:i:1:p:63-76:d:30
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    References listed on IDEAS

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    1. Walid Chkili, 2022. "The links between gold, oil prices and Islamic stock markets in a regime switching environment," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 169-186, March.
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    Cited by:

    1. Diseko, Nomathemba Veronica & Bonga-Bonga, Lumengo & Manguzvane, Mathias Mandla, 2015. "Dynamic portfolio rebalancing with safe-haven assets," MPRA Paper 123408, University Library of Munich, Germany.
    2. Xiaoli Hao & Shufang Wen & Jianing Zhu & Haitao Wu & Yu Hao, 2024. "Can business managerial capacity improve green innovation in different industries? Evidence from Chinese listed companies," Business Strategy and the Environment, Wiley Blackwell, vol. 33(3), pages 2600-2620, March.

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