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Dynamic spillovers between commodity and currency markets

Dynamic spillovers between commodity and currency markets
Dynamic spillovers between commodity and currency markets
In this study, we examine the dynamic link between returns and volatility of commodities and currency markets. Based on weekly data over the period from January 6, 1987 to July 22, 2014, we find the following empirical regularities. First, our results suggest that the information contents of gold, silver, platinum, and the CHF/USD and GBP/USD exchange rates can help improve forecast accuracy of returns and volatilities of palladium, crude oil and the EUR/CHF and GBP/USD exchange rates. Second, gold (CHF/USD) is the dominant commodity (currency) transmitter of return and volatility spillovers to the remaining assets in our model. Third, the analysis of dynamic spillovers shows time{ and event{specific patterns. For instance, the dynamic spillover effects originating in gold and silver (platinum) returns and volatility intensified (degraded) in the period marked by the global financial crisis. After the global financial crisis, the net transmitting role of gold and silver (platinum) returns shocks weakened (strengthened), while the net transmitting role of gold, silver and platinum volatility shocks remained relatively high. Overall, our findings reveal that, while the static analysis clearly classifies the aforementioned variables into net transmitters and net receivers, the dynamic analysis denotes episodes wherein the role of transmitters and receivers of return (volatility) spillovers can be interrupted or even reversed. Hence, even if certain commonalities prevail in each identified category of commodities, such commonalities are time- and event- dependent.
Precious metals, OIl prices, Exchange rates, static and dynamic spillovers
1057-5219
303-319
Antonakakis, Nikolaos
6209c7e2-ea9d-437d-a215-93b5c11a502a
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Antonakakis, Nikolaos
6209c7e2-ea9d-437d-a215-93b5c11a502a
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978

Antonakakis, Nikolaos and Kizys, Renatas (2015) Dynamic spillovers between commodity and currency markets. International Review of Financial Analysis, 41, 303-319. (doi:10.1016/j.irfa.2015.01.016).

Record type: Article

Abstract

In this study, we examine the dynamic link between returns and volatility of commodities and currency markets. Based on weekly data over the period from January 6, 1987 to July 22, 2014, we find the following empirical regularities. First, our results suggest that the information contents of gold, silver, platinum, and the CHF/USD and GBP/USD exchange rates can help improve forecast accuracy of returns and volatilities of palladium, crude oil and the EUR/CHF and GBP/USD exchange rates. Second, gold (CHF/USD) is the dominant commodity (currency) transmitter of return and volatility spillovers to the remaining assets in our model. Third, the analysis of dynamic spillovers shows time{ and event{specific patterns. For instance, the dynamic spillover effects originating in gold and silver (platinum) returns and volatility intensified (degraded) in the period marked by the global financial crisis. After the global financial crisis, the net transmitting role of gold and silver (platinum) returns shocks weakened (strengthened), while the net transmitting role of gold, silver and platinum volatility shocks remained relatively high. Overall, our findings reveal that, while the static analysis clearly classifies the aforementioned variables into net transmitters and net receivers, the dynamic analysis denotes episodes wherein the role of transmitters and receivers of return (volatility) spillovers can be interrupted or even reversed. Hence, even if certain commonalities prevail in each identified category of commodities, such commonalities are time- and event- dependent.

Text
ANTONAKAKIS_2015_cright_IRFA_Dynamic_Spillovers_between_Commodity_and_Currency_Markets - Accepted Manuscript
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Accepted/In Press date: 1 February 2015
e-pub ahead of print date: 10 February 2015
Published date: October 2015
Keywords: Precious metals, OIl prices, Exchange rates, static and dynamic spillovers

Identifiers

Local EPrints ID: 434041
URI: http://eprints.soton.ac.uk/id/eprint/434041
ISSN: 1057-5219
PURE UUID: 86f1a5cf-99c7-4dbe-983d-f22831ef7a5f
ORCID for Renatas Kizys: ORCID iD orcid.org/0000-0001-9104-1809

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Date deposited: 11 Sep 2019 16:30
Last modified: 27 Jan 2020 13:59

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Author: Nikolaos Antonakakis
Author: Renatas Kizys ORCID iD

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