Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/303765 
Year of Publication: 
2022
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 10 [Issue:] 1 [Article No.:] 2114161 [Year:] 2022 [Pages:] 1-25
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
We examine the time-frequency lead-lag relationships and the degree of integration between the US financial stress index and global commodity prices (i.e., oil, gold, silver, and cocoa) with data covering over 47 decades (January 1975 to December 2021). For this purpose, we resort to the bi- and multiple wavelet econometric approaches. Findings from the bivariate wavelet analysis evidence the significant influence of the US financial stress in driving the price-generating process in commodities markets. Our findings support the hedging abilities of commodities across the time-frequency space. Findings from the multiple correlations explicate that the interrelation between the commodities and financial stress is attributable to their interdependence in the long term during financial market meltdowns. The dynamic and nonhomogeneous lead/lag relations underscored by our findings highlight the importance of cross-commodity investments. As such, by acknowledging the response of different commodities to financial stress, asset allocation should factor in commodities that offer opposing responses to a financial stress to hedge downside risks associated with portfolios. Our findings are of interest to regulators, risk managers, investors, and commodities producers.
Subjects: 
financial stress
global commodities prices
commodity financialisation
bivariate wavelet
wavelet multiple correlations
interdependence
JEL: 
C58
E44
F15
G01
G11
Q02
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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