The effects of commodity financialization on commodity market volatility

Ding, Shusheng; Cui, Tianxiang; Zheng, Dandan; Du, Min

doi:10.1016/j.resourpol.2021.102220

Cited by 35 publications

(17 citation statements)

References 37 publications

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“…COVID 19 witnessed a huge drop in commodities and stock returns, following the lockdown of economic activities and restrictions on travel. Hence, energy commodities especially crude oil was hit by the pandemic and there was huge fluctuation in their prices, ( Ding et al, 2021 ). Which eventually led to volatility spillover in entire financial market due to their interconnectedness ( Guo et al, 2021 ).…”

Section: Empirical Results and Discussionmentioning

confidence: 99%

“…The effect is significant at lower tail and insignificant at upper tail for wheat. This may be particularly due to fact that wheat attracts more liquidity than any other agriculture commodity ( Ding et al, 2021 ). The effects are significant at lower and upper tail for oats and corn.…”

Section: Empirical Results and Discussionmentioning

confidence: 99%

“…The paper aims at selecting most of the commodities listed on Investing.com , trying to represent a complete picture of the commodity market. Twenty-three commodities comprise of Western Texas Intermediate (WTI) crude oil, heating oil, natural gas, gold, silver, lead, copper, wheat, corn, coffee, Brent oil (brent), London cocoa, London sugar, lumber, nickel, oats, orange juice, platinum, palladium, tin, zinc, US soyabean and US cotton out of which nine are similar of Bianchi et al (2020) , three energy commodities are similar of Zhang et al (2017) , seven commodities are identical to Adams and Glück (2015) ; Hung el at (2021) and Ding et al (2021) and four are same as studied by Boako and Alagidede (2016) . The data was collected for the period between July 7, 2008 and May 5, 2021.…”

Section: Datamentioning

confidence: 99%

“…This may be due to the fact that equity and energy market respond similarly to a particular shock and therefore, there interaction substantially increased with the passage of time ( Zhang and Li, 2016 ). Further, the financialization of agriculture commodities is weak as they are illiquid and unattractive for capital flows ( Ding et al, 2021 ). The study also explores the connectedness among commodities and stock market in developed countries and developing countries.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

A comparative analysis of the financialization of commodities during COVID-19 and the global financial crisis using a quantile regression approach

Sharma

2022

Resources Policy

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Section: Empirical Results and Discussionmentioning

confidence: 99%

Section: Empirical Results and Discussionmentioning

confidence: 99%

Section: Datamentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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A comparative analysis of the financialization of commodities during COVID-19 and the global financial crisis using a quantile regression approach

Sharma

2022

Resources Policy

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“…With the financialization of commodity markets, during the last several decades, the linkage between different commodity futures markets has become a focal research point in the existing literature (see Ding et al, 2021 ; Tang & Xiong, 2012 ). In particular, Pindyck and Rotemberg ( 1990 ) develop the excess comovement hypothesis and examine the comovement of commodity returns and find that the heredity effect is one driving factor for the comovement of different commodity markets.…”

Section: Introductionmentioning

confidence: 99%

The impact of COVID‐19 on the interdependence between US and Chinese oil futures markets

Zhang

Ding

Shi

2022

Journal of Futures Markets

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The oil futures market plays a vital role in the global financial system, especially after the negative future oil price rose during the COVID‐19 pandemic. This paper investigates the COVID‐19 impact on the interdependence between the US and Chinese oil futures markets by extending the dynamic conditional correlation‐generalized autoregressive conditional heteroskedasticity (DCC‐GARCH) models with incorporating COVID‐19 variables and by applying vector autoregression (VAR) models. Our study reveals that the COVID‐19 pandemic enhanced the long‐run correlation between the two oil markets. In contrast, daily changes in pandemic severity had a negative effect on the short‐term transient correlation. Our results show that COVID‐19 changed the one‐direction causality from the US oil market to the Chinese market in the pre‐COVID period to a bidirectional causal relation between the two markets during the COVID period. It strengthened the volatility spillover effect from the Chinese to US markets. These findings are helpful to regulars' monitoring oil supply chain risk and investors' cross‐market hedging of spillover risks from a systematic risk perspective.

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COVID‐19 and tail risk contagion across commodity futures markets

Qiao

Han

2022

Journal of Futures Markets

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This paper examines the impact of COVID-19 on tail risk contagion across commodity futures markets using a copula-based network method. We document a significant increase in the lower and upper tail contagiousness of commodities following the COVID-19 outbreak. Contagion shows an obvious clustering characteristic, that is, there is higher tail risk connectedness between commodities in the same category. Agricultural commodities are significantly less contagious than metals and energy commodities; soft commodities in particular can offer investors significant diversification benefits. There are several hub commodities in the contagion network, chief among them copper, which are good transmitters of shocks and should be treated with caution by investors and regulators. Although tail risk and contagiousness of individual commodities increase together during the pandemic, we find a negative cross-sectional relationship between tail risk and contagiousness, that is, commodities with high tail risk are not necessarily highly contagious and may even be less so.

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The effects of commodity financialization on commodity market volatility

Cited by 35 publications

References 37 publications

A comparative analysis of the financialization of commodities during COVID-19 and the global financial crisis using a quantile regression approach

A comparative analysis of the financialization of commodities during COVID-19 and the global financial crisis using a quantile regression approach

The impact of COVID‐19 on the interdependence between US and Chinese oil futures markets

COVID‐19 and tail risk contagion across commodity futures markets

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