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Realized Volatility Spillovers between Energy and Metal Markets: A Time-Varying Connectedness Approach

Author

Listed:
  • Juncal Cunado

    (Department of Economics, University of Navarra, Pamplona, Spain)

  • David Gabauer

    (Data Analysis Systems, Software Competence Center Hagenberg, Hagenberg, Austria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

This paper analyzes the degree of dynamic connectedness between energy and metal commodity prices in the pre and post COVID-19 era, using the TVP-VAR based connectedness approach of Antonakakis et al. (2020). The results suggest that market interconnectedness slightly increased following the outbreak of COVID-19, although this increase was lower and less persistent than that observed after the Global Financial Crisis of 2008. Furthermore, we find that crude oil was the main transmitter of shocks during the period prior to COVID-19 while heating oil, gold and silver became the main transmitters of shocks during the COVID-19 pandemic. On the contrary, natural gas and palladium have been the main receivers of shocks during the whole sample period, making these two commodities attractive hedging and safe-haven options for investors during the pandemic crisis. The implications of our findings for portfolio diversification and energy transition policies are discussed.

Suggested Citation

  • Juncal Cunado & David Gabauer & Rangan Gupta, 2021. "Realized Volatility Spillovers between Energy and Metal Markets: A Time-Varying Connectedness Approach," Working Papers 202180, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202180
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    Cited by:

    1. Sisa Shiba & Juncal Cunado & Rangan Gupta, 2022. "Predictability of the Realised Volatility of International Stock Markets Amid Uncertainty Related to Infectious Diseases," JRFM, MDPI, vol. 15(1), pages 1-18, January.
    2. Juncal Cunado & David Gabauer & Rangan Gupta, 2024. "Realized volatility spillovers between energy and metal markets: a time-varying connectedness approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-17, December.
    3. Ali, Shoaib & Ijaz, Muhammad Shahzad & Yousaf, Imran, 2023. "Dynamic spillovers and portfolio risk management between defi and metals: Empirical evidence from the Covid-19," Resources Policy, Elsevier, vol. 83(C).
    4. Younis, Ijaz & Du, Anna Min & Gupta, Himani & Shah, Waheed Ullah, 2024. "Dynamic spillover effects and interconnectedness of DeFi assets, commodities, and Islamic stock markets during crises," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    5. Ghosh, Bikramaditya & Pham, Linh & Teplova, Tamara & Umar, Zaghum, 2023. "COVID-19 and the quantile connectedness between energy and metal markets," Energy Economics, Elsevier, vol. 117(C).

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    Keywords

    Realized volatilities; energy market; metal market; TVP-VAR; dynamic connectedness;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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