On the time scale behavior of equity-commodity links: Implications for portfolio management

•We investigate the time-scale relationships between US equity & commodity markets.•The risk-return profitability analysis is based on the wavelet coherence measure.•Both markets exhibit time-varying co-movement patterns across investment horizons.•We find evidence of time-frequency causality between the two investigated markets.•The results have implications for asset allocation & portfolio diversification.

We investigate the time-scale relationships between US equity and commodity markets. The empirical evidence from the risk-return profitability analysis based on the wavelet coherence measure shows that equity and commodity markets exhibit time-varying co-movement patterns and behave differently across investment horizons. Moreover, we find evidence of time-frequency causality between the two investigated markets. Our results can have important implications for optimal asset allocation and portfolio diversification.