Dynamic frequency volatility spillovers and connectedness between strategic commodity and stock markets: US-based sectoral analysis
Date
2022
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Mensi, W.
Al Rababa'a, A.R.
Alomari, M.
Vo, X.V.
Kang, S.H.
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Journal article
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Resources Policy, 2022; 79(102976):1-20
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This study examines the time-varying frequency spillovers and connectedness between U.S. sector stock markets and both crude oil and gold and their implications on portfolio management. Using the methodology of Diebold and Yilmaz (2012) and Baruník and Křehlík (2018), the results show that oil, gold, financials, utilities, communications services, consumer staples (at short term), and health care are net receivers of spillovers in the system, and the remaining sectors are net contributors regardless of the frequencies. The extent of spillover reduces when both gold and oil assets are added to sector portfolio. Furthermore, the connectedness among markets is heterogeneous and depends on time horizons and market conditions. Oil offers a higher hedging effectiveness in both the short and long term as well as over different turbulent periods compared to oil. The hedging effectiveness is higher in the long term compared to the short term.
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Copyright 2022 Elsevier