Tail risk spillover effects in commodity markets: A comparative study of crisis periods

Muhammad Abubakr Naeem, Foued Hamouda, Sitara Karim

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This research aims to investigate the propagation of extreme downside risk, commonly referred to as tail risk, within commodity markets using an innovative CAViaR-based connectivity model. We also evaluate the influence of various crises, including the global financial crisis, the shale oil revolution, the COVID-19 pandemic, and the Russia-Ukraine conflict, on the dynamic relationships among seventeen different commodity markets. Our findings reveal a diverse pattern of interconnections among these markets during distinct crisis periods. Surprisingly, we observe that the nature of these interconnections is remarkably similar during geopolitical and health crises. Notably, the spillover effects between different commodity categories are more pronounced during the COVID-19 pandemic and the Russia-Ukraine conflict than during the global financial crisis and the shale oil revolution. However, it is important to note that the total risk spillovers are more substantial during the global financial crisis. Furthermore, our analysis delves into the unique characteristics of each market, revealing that precious metals can function as a safe haven for both energy and industrial metals during times of economic turbulence.

Original languageEnglish
Article number100370
JournalJournal of Commodity Markets
Volume33
DOIs
Publication statusPublished - Mar 2024
Externally publishedYes

Keywords

  • CAViaR
  • Commodity markets
  • Covid-19
  • GFC
  • Russia-Ukraine conflict

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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