Article ID Journal Published Year Pages File Type
1003565 Research in International Business and Finance 2015 21 Pages PDF
Abstract

•Interactions between financial and commodity markets.•Spillover effects quantified in ADCCX framework.•Time-varying correlations and dynamic effects across markets.•Update the concept of volatility surprise.

To assess how financial markets and commodities are inter-related, this paper introduces a ‘volatility surprise’ component into the asymmetric DCC with one exogenous variable (ADCCX) framework. We develop an econometric model in which returns and volatility allow to influence pairs of assets, and derive several case studies linking commodities to stocks, bonds and currencies from 1983 to 2013. The innovative feature of our model is that these volatility spillovers are modeled consistently within the correlation dynamics of the ADCCX. We find evidence that return and volatility spillovers do exist between commodity and financial markets and that in turn, their relative impact on each other is very substantial.

Graphical abstractFigure optionsDownload full-size imageDownload as PowerPoint slide

Related Topics
Social Sciences and Humanities Business, Management and Accounting Business and International Management
Authors
, ,