On the dynamic dependence between equity markets, commodity futures and economic uncertainty indexes

- We apply wavelet analysis to study dynamic dependence between US stocks and commodities.
- Based on decomposed time series we assess different dependence schemes between long-run and short-run trends.
- Stronger dependence between US stocks and commodities is present in the long run.
- Long-run trends between the assessed time series are not characterized by joint extreme movements.
- Dependence between long-run trends of US stocks and volatility indices indicates the existence of a leverage effect.

This paper provides a thorough analysis on multiscale dependence schemes between equity markets, commodity futures and uncertainty indexes. Based on decomposed return series, we provide an exhaustive survey on time varying dependence, before and after the outbreak of financial crisis.Although daily returns of equity markets and commodity futures are described by weak dependence, our results indicate a stronger dependence between the long-run trends of both asset classes.