Dynamic spillovers among natural gas, liquid natural gas, trade policy uncertainty, and stock market

Given Qatar's economic structure and geographical features, we examine the likely spillovers among natural gas, liquid natural gas (LNG), trade policy uncertainty (TPU), and stock markets using the spillover index developed by Diebold and Yilmaz (2012). The results show considerable spillover among the aforementioned variables. Natural gas and LNG are the net receivers of spillovers, whereas TPU and the stock market are net spillover transmitters. TPU had the lowest sensitivity in the network system, whereas natural gas and LNG had the highest sensitivities. Moreover, the measure of spillovers varies over time and jumps during financial and COVID-19 crises. TPU and the stock market were the strongest driving forces of spillover. In addition, while the stock market has the highest transmission of natural gas and LNG, consistent with the energy-oriented structure of corporations in Qatar's stock market, it showed the highest sensitivity to LNG and natural gas. Both forms of energies—natural gas and LNG—indicate noticeable sensitivity to the stock market and TPU, respectively. Moreover, TPU is more sensitive to natural gas and LNG shocks. These results have significant implications for investors, policymakers, and governments.

Upside/Downside spillovers between oil and Chinese stock sectors: From the global financial crisis to global pandemic

This paper examines the effects of the COVID-19 outbreak, recent oil price fall, and both global and European financial crises on dependence structure and asymmetric risk spillovers between crude oil and Chinese stock sectors. Using time-varying symmetric and asymmetric copula functions and the conditional Value at Risk measure, we provide evidence of positive tail dependence in most sectors using copula and conditional Value-at-Risk techniques. We can see the average dependence between oil and industries during the oil crisis. Moreover, we find strong evidence of bidirectional risk spillovers for all oil-sector pairs. The intensity of risk spillovers from oil to all stock sectors varies across sectors. The risk spillovers from sectors to oil are substantially larger than those from oil to sectors during COVID-19. Furthermore, the return spillover is time varying and sensitive to external shocks. The spillover strengths are higher during COVID-19 than financial and oil crises. Finally, oil do not exhibit neither hedge nor safe-haven characteristics irrespective of crisis periods.

Downside and upside risk spillovers between precious metals and currency markets: Evidence from before and during the COVID-19 crisis

This paper investigates the tail dependence dynamics and asymmetric risk spillovers between the futures of four important precious metals (gold, silver, platinum, and palladium) and seven leading currencies (EUR, GBP, JPY, CAD, AUD, CHF, and CNY) before and during the COVID-19 crisis using the time-varying-parameter copula and the conditional Value-at-Risk (CoVaR) method. The results show the symmetric dependence between currencies and precious metals before the COVID-19 crisis. In contrast, we show negative and positive tail asymmetric dependences during the pandemic crisis. The COVID-19 crisis significantly amplifies the magnitude of spillover effects among the studied markets where the AUD currency exhibits the largest transmission and reception of downside and upside spillover to/from most precious metals before and during the pandemic crisis. Currency investors and portfolio managers could use the obtained results to better hedge and manage their investment positions when markets are affected by health crises.

Frequency spillovers between green bonds, global factors and stock market before and during COVID-19 crisis.

This paper examines frequency dynamic spillovers in return and volatility and the hedging ability of Green Bonds, gold, silver, oil, the US dollar index, and volatility index against downside US stock prices before and during the COVID-19 pandemic outbreak and for the short and long run. To do so, we use the Diebold and Yilmaz (2014), the TVP-VAR model, and the frequency spillover index by Baruník and Krehlík (2018). We show that the short-term volatility spillovers dominate their long-term counterparts. Green Bond is net transmitters of spillovers in the system at the short term and net receivers at the long term. S&P500 and silver (USDX and oil) are net transmitters (receivers) of short- and long-term spillovers. Gold and VIX are net receivers of short-term spillovers and net transmitters of long-term spillovers. COVID-19 crisis has more effects on the short-term spillover, which reaches its highest level early 2020. COVID-19 and time horizons lead the direction and the magnitude of spillovers. The Quantile-on-Quantile regression analysis shows significant nonlinear relationships between markets under study. More interestingly, we show that green bonds and gold are safe haven assets for US equity investors during COVID-19. On the other hand, a mixed portfolio offers higher diversification benefits. Finally, hedging effectiveness is dependent on COVID-19 and time horizon.

Does safe haven exist? Tail risks of commodity markets during COVID-19 pandemic

This paper investigates the tail behavior patterns of commodity assets, the risk exposure of these assets, and how they rank given their safe haven properties. We use state-of-the-art dynamic generalized autoregressive score models to jointly estimate tail risk measures for ten commodity assets (aluminum, copper, crude oil, gasoline, gold, heating oil, lead, soybeans, tin, and wheat) over the period from September 14, 2011 to June 30, 2021. Our in-sample findings suggest that aluminum outperforms gold as a safe haven in both pre- and COVID-19 times. The out-of-sample results confirm that aluminum retains its leading role during the COVID-19 pandemic. These findings bear implications for constructing well-diversified portfolios which is vital for investors, portfolio managers, and financial advisors, and for policymakers to design policies that ensure financial stability during periods of market turmoil, such as the COVID-19 pandemic.

Impacts of COVID-19 on dynamic return and volatility spillovers between rare earth metals and renewable energy stock markets

We examine the time-frequency co-movements and return and volatility spillovers between the rare earths and six major renewable energy stocks. We employ the wavelet analysis and the spillover index methodology from January 1, 2018 to May 15, 2020. We report that the COVID-19-triggered significant increase in co-movements and spillovers in returns and volatility between the rare earths and renewable energy returns and volatility. The rare earths act as net recipient of both return and volatility spillovers, while the clean energy stocks are net transmitters of return and volatility spillovers before and during the COVID-19 crisis. The solar and wind stocks are net transmitters/receivers of spillovers before/during the pandemic. The remaining markets shift from net spillover receivers to transmitters or vice versa;evidencing the effects of the pandemic. Our results show that cross-market hedge strategies may have their efficiency impaired during the periods of crises implying a necessity of portfolio rebalancing.

Frequency dependence between oil futures and international stock markets and the role of gold, bonds, and uncertainty indices: Evidence from partial and multivariate wavelet approaches

This paper examines the frequency dynamic co-movements between crude oil prices and stock market returns of three developed economies (Canada, Japan, and the USA) and the emerging BRICS (Brazil, Russia, India, China, and South Africa) economies by considering four global factors (U.S. treasury bills, S&P volatility index, gold price, and U.S. EPU index). Using bivariate and multivariate wavelet approaches, the results show evidence of time-frequency co-movements between the considered markets at medium and low frequencies. Besides, the results reveal that the co-movement is intensified during global financial crisis and COVID-19 pandemic periods, confirming recoupling hypothesis. The risk analysis reveals dependence and persistence of co-movements, and aggravation of portfolio risk in the BRICS economies and across markets during bouts of afflictions. These findings should encourage the relevant national and transnational policy makers to consider these co-movements which vary over time and in duration when setting up regulations that deem to enhance the market efficiency.

Extreme return spillovers and connectedness between crude oil and precious metals futures markets: Implications for portfolio management

This paper examines quantile return spillovers and the connectedness between crude oil futures and key precious metals (PMs) using the approach developed by Ando et al. (2022). Our findings show that using the cross-quantilogram directional spillover method results in significant spillovers from oil to PMs under an extreme downside oil market scenario. Oil impacts both palladium and platinum under an extreme upside oil market status. Under normal oil market conditions, we show insignificant spillovers from oil to PMs. We find an insignificant dependence of PMs on oil during bearish markets, indicating that PMs serve as a safe haven asset. However, we find that oil and palladium are net receivers of spillovers across quantiles, except for palladium at intermediate quantiles, and other PMs are net contributors of spillovers across all quantiles. The spillovers are higher at extreme quantiles and increase during extreme events. Furthermore, we find no connection between platinum and gold under normal market conditions and a weak connection between platinum and both silver and palladium during bearish market scenarios. Precious metals are good diversifying assets for oil portfolios. The hedging strategy using PMs is less expensive during the COVID-19 pandemic than before it, with the exception of platinum. Finally, PMs offer higher hedging effectiveness before the pandemic crisis, whereas palladium provides the highest hedging effectiveness before and during the pandemic crisis.

Extreme quantile connectedness and spillovers between oil and Vietnamese stock markets: a sectoral analysis

Purpose This study examines the extreme quantile connectedness and spillovers between West Texas Intermediate (WTI) crude oil futures and ten Vietnamese stock market sectors. Knowledge of such links is important to both investors and policymakers in understanding the transmission of shocks across markets. Design/methodology/approach The authors employ the extreme quantile connectedness methodology of Ando et al. (2022). Findings Initial results show that the size of spillovers is higher during bearish markets than bullish markets and under major financial, political, energy and pandemic events. The oil market is a net receiver of spillovers during downward markets and net contributors during upward markets. The banking sector is a net contributor of spillovers, whereas consumer discretionary and consumer staples are net receivers for different quantiles. The role of the remaining sectors as net receivers/contributors is sensitive to the quantiles. Oil has a large spillover effect on the electricity sector for all quantiles. Comparing all crises, oil offers the best hedging effectiveness to the Vietnamese sector during the coronavirus disease 2019 (COVID-19) crisis. Moreover, oil was a cheap hedge asset during oil crises. Finally, oil provides the highest hedging effectiveness for healthcare during the global financial crisis (GFC) and consumer staples during the European debt crisis (EDC), oil crisis and COVID-19. Originality/value Acknowledging the presence of heterogeneity in the relation between oil and economic sectors under different market conditions, this study is the first to examine the extreme quantile connectedness between oil and Vietnamese sectors.

Spillovers and diversification benefits between oil futures and ASEAN stock markets

This study combines copula functions, wavelet decomposition and conditional VaR methods to examine spillovers and diversification benefits between oil futures and ASEAN stock markets (Indonesia, Philippines, Malaysia, Singapore, Vietnam and Thailand). The results show zero tail dependence between oil and stock returns at the short term. In contrast, we find a lower tail independence and an upper tail dependence at the long term. Our results highlight that oil futures serve as hedge assets at short term and a safe haven asset at the long term. Furthermore, we find significant and asymmetric risk spillovers from oil to ASEAN markets. The downside and upside spillovers are higher at the long term than short term and increase during the GFC, the recent oil crisis, and COVID-19 periods. Finally, we show that an equally weighted portfolio provides highest diversification benefits at both lower and medium tail distributions with the exception of Malaysian market. The diversification benefits of oil are sizeable for less coupling markets and fall during times of GFC and oil crisis.

Frequency Connectedness and Spillovers among Oil and Islamic Sector Stock Markets: Portfolio Hedging Implications

Using the asymmetric Baba-Engle-Kraft-Kroner (BEKK)-GARCH model and the frequency spillover methodology by Baruník and Křehlík (2018), this paper examines spillovers and portfolio management between crude oil and US Islamic sector stocks. The results show significant time-varying spillovers between oil and Islamic sectors. The short-term spillovers are stronger than their long-term counterparts. The spillovers intensify during extreme events (global financial crisis and COVID-19 pandemic). The aggregate index, consumer services, raw materials, and manufacturing are net contributors of spillovers in the short term, whereas the remaining sectors are net recipients. In the long-term horizon, we find that consumer goods and finance become net transmitters of spillovers. The raw materials sector becomes a net recipient of spillovers in the long term. Finally, hedging effectiveness is lower in the long term than in the short term during the oil crisis in 2015-2016 and the US presidential election in 2017, US-China trade tension, and the COVID-19 pandemic.

Pricing efficiency and asymmetric multifractality of major asset classes before and during COVID-19 crisis

We examine the impact of COVID-19 pandemic crisis on the pricing efficiency and asymmetric multifractality of major asset classes (S&P500, US Treasury bond, US dollar index, Bitcoin, Brent oil, and gold) within a dynamic framework. Applying permutation entropy on intraday data that covers between April 30, 2019 and May 13, 2020, we show that efficiency of all sample asset classes is deteriorated with the outbreak, and in most cases this deterioration is significant. Results are found to be robust under different analysis schemes. Brent oil is the highest efficient market before and during crisis. The degree of efficiency is heterogeneous among all markets. The analysis by an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) approach shows evidence of asymmetric multifractality in all markets which rise with the scales. The inefficiency is higher during downward trends before the pandemic crisis as well as during COVID-19 except for gold and Bitcoin. Moreover, the pandemic intensifies the inefficiency of all markets except Bitcoin. Findings reveal increased opportunities for price predictions and abnormal returns gains during the COVID-19 outbreak.

Spillovers and connectedness between green bond and stock markets in bearish and bullish market scenarios

This study examines the quantile connectedness between eight green bonds and the S&P 500 index using the methodology of Ando et al. (2022). We show that green bonds and the S&P 500 index exhibit stronger connectedness during crises (GFC, COVID-19, etc.). Furthermore, green bonds are relatively less volatile during extraordinary events. The distribution tails dictate connectedness (short-term) in the wake of extreme events. The quantile spillover in the green financial markets largely originates from their energy and resource (water conservation) counterparts. These observations underscore the prevalence of upside, downside, and tail risks from green stock markets, particularly following crisis events.

Switching connectedness between real estate investment trusts, oil, and gold markets

We study price-switching spillovers between real estate investment trusts (REITs), oil, and gold markets by considering high- and low-volatility regimes as described by Markov-switching vector autoregression. Empirical results for different REIT markets indicate that gold (oil) has a lower (higher) impact on REITs in a high-volatility regime than in a low-volatility regime. Furthermore, in a low-volatility regime, gold and oil are net spillover contributors to REITs, while in a high-volatility regime, REITs are net spillover contributors. Price spillovers are time-varying, and climb during the early COVID-19 pandemic period and in early 2022.

Dynamic frequency relationships between bitcoin, oil, gold and economic policy uncertainty index

Purpose>This paper aims to examine the frequency of co-movements and asymmetric dependencies between bitcoin (BTC), gold, Brent crude oil and the US economic policy uncertainty (EPU) index.Design/methodology/approach>The authors use a wavelet approach and a quantile-on-quantile regression (QQR) method.Findings>The results show a positive interdependence between BTC and commodity price returns at both medium and low frequencies over the sample period. In contrast, the dependence is negative between BTC and EPU index at both medium and low frequencies. Furthermore, the co-movements between markets are more pronounced during crises. The results show that strategic commodities and EPU index have the ability to predict BTC price returns at both medium- and long-terms. The QQR method reveals that higher gold returns tend to predict higher/lower BTC returns when the market is in a bullish/bearish state. Moreover, lower gold returns tend to predict lower (higher) BTC returns when the market is in a bearish (bullish) state (positive (negative) relationship). The lower Brent returns tend to predict higher/lower BTC returns when the market is in a bullish/bearish state. High Brent quantiles tend to predict the lower BTC returns in its extremely bearish states. Finally, higher and lower EPU changes tend to predict lower and higher BTC returns when the market is in a bearish/bullish state (negative relationship).Originality/value>There is generally a lack of understanding of the linkages between BTC, gold, oil and uncertainty index across multiple frequencies. This is, as far as the authors know, the first attempt to apply both the wavelet approach and a QQR method to examine the multiscale linkages among markets under study. The findings should encourage the relevant policymakers to consider these co-movements which vary over time and in duration when setting up regulations that deem to enhance the market efficiency.

Quantile connectedness and spillovers analysis between oil and international REIT markets

We examine the quantile return spillovers between oil and international REIT markets (Australia, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Netherlands, New Zealand, Singapore, UK, and US). Using a quantile connectedness approach, we show that the extreme oil–REIT nexus is heterogeneous and asymmetric. The return spillover is stronger at lower quantiles. Furthermore, the oil market acts as a net transmitter of return spillovers to the REIT markets during times of downside return and a net receiver of spillovers during upside returns. The hedging strategy is expensive during COVID-19, with oil offering the highest hedging effectiveness for Hong Kong. Gel classification : G14, F36, C40

COVID-19 pandemic's impact on intraday volatility spillover between oil, gold, and stock markets.

This study examines the volatility spillovers between the US stock market (S&P500 index) and both oil and gold before and during the global health crisis (GHC). We apply the FIAPARCH-DCC model to the 15-minute intraday data. The results showed negative (positive) conditional correlations between the S&P500 and gold (oil). The time-varying conditional correlations between markets were higher during COVID-19 spread. Moreover, gold offers more diversification gains than oil does during the pandemic. Hedging is more expensive during a pandemic than before. Oil provides higher hedging effectiveness (HE) than gold for all sub-periods. HE was lower during the COVID-19 outbreak for both oil and gold. These findings have important implications for both equity investors and policymakers.

Asymmetric spillovers and connectedness between crude oil and currency markets using high-frequency data

This paper examines the asymmetric spillovers and connectedness between the spot prices of West Texas Intermediate crude oil and six popular currencies—the Euro, Japanese Yen, British Pound, Australian Dollar, Swiss Franc, and Canadian Dollar. We analyze the asymmetric realized volatility spillovers spot prices as well as the higher moments such as their realized skewness and kurtosis. The estimated results indicate that these markets are strongly interconnected and that the currencies of larger economies as well as resource exporters are mainly net transmitters of volatility. However, this attribute is time-varying, especially during global economic events/shocks. The asymmetric volatility analysis finds that bad volatilities trump good ones on average. This attribute of the sample markets is also time-varying. The evaluation of directional networks in semi-variances reveals the dominance of bad volatilities over good ones and that bad volatilities from the currencies of larger and resource-based economies and the crude oil market are imparted for the most part. Moreover, the bad volatility of the British Pound, especially in the wake of Brexit, is a key contributor of its good volatility. However, in the wake of the COVID-19 pandemic, currencies of resource-based economies as well as the crude oil appear to impart small magnitudes of good volatilities. These findings have important implications for policymakers and highlight the need for responses tailored to different periods and markets.

Impacts of COVID-19 outbreak, macroeconomic and financial stress factors on price spillovers among green bond.

We examine the impacts of the COVID-19 pandemic and global risk factors on the upside and downside price spillovers of MSCI global, building, financial, industrial, and utility green bonds (GBs). Using copulas, CoVaR, and quantile regression approaches, we show symmetric tail dependence between MSCI global GB and both building and utility GBs. Moreover, the upper tail dependence between MSCI global GB and financial GB intensified during COVID-19. We find asymmetric risk spillovers from MSCI global GB to the remaining GBs. Finally, the COVID-19 spread, the Citi macro risk index, and the financial condition index contribute positively to the quantiles' risk spillovers. The spillover index method shows significant dynamic volatility spillovers from global GB to GB sectors that intensify during the pandemic outbreak, except for financial GB. The causality-in-mean and in-variance from COVID-19, Citi macro risk index, and US financial condition index to the downside and upside spillover effects are sensitive to quantiles.

Dynamic and frequency spillovers between green bonds, oil and G7 stock markets: Implications for risk management

This paper examines the dynamic and frequency spillovers between global Green Bonds (GBs), WTI oil and G7 stock markets using the time-frequency spillover index by Baruník and Křehlík (2018) and wavelet coherency approach. The results show that the spilllovers is dynamic and crisis-sensitive. Furthermore, adding GBs and oil futures to stock portfolio reduces the spillover size during turmoil periods. The short-term spillovers (up to five trading days) represent the largest proportion of the total spillovers. A significant jump in spillovers is observed in the early of COVID-19 outbreak (March-April 2020). Interestingly, Canada, France, Germany, Italy, and UK are the net transmitters of spillovers, whereas Japan and GBs are the net recipients of the spillovers, irrespective of time horizons. Oil and US stock market shift from net contributors in short term to net receipts in medium and long terms. Wavelet coherence analysis reveals significant co-movements between G7 stock markets and both oil and GBs. The co-movements are more pronounced in both medium and long terms and during COVID-19 spread where both oil and GBs lead stock markets. GBs provide higher diversification benefits to G7 investors than oil in the short-term. The hedging is expensive at the long term for GBs and intermediate term for WTI oil. Finally, the hedge effectiveness of crude oil is higher than GBs, irrespective of time horizons.