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On the time scale behavior of equity-commodity links: Implications for portfolio management
European University Institute, Florence Italy,Paris France, Rimini Italy.
IPAG Business School, Paris, France.
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.ORCID iD: 0000-0002-8145-1000
2016 (English)In: Journal of international financial markets, institutions, and money, ISSN 1042-4431, E-ISSN 1873-0612, Vol. 41, 30-46 p.Article in journal (Refereed) Published
Abstract [en]

We investigate the time-scale relationships between US equity and commodity markets. The empirical evidence from the risk-return profitability analysis based on the wavelet coherence measure shows that equity and commodity markets exhibit time-varying comovement patterns and behave differently across investment horizons. Moreover, we find evidence of time-frequency causality between the two investigated markets. Our results can have important implications for optimal asset allocation and portfolio diversification.

Place, publisher, year, edition, pages
Elsevier, 2016. Vol. 41, 30-46 p.
National Category
Business Administration Economics
Identifiers
URN: urn:nbn:se:liu:diva-124590DOI: 10.1016/j.intfin.2015.12.003ISI: 000373611400003OAI: oai:DiVA.org:liu-124590DiVA: diva2:900935
Note

Funding agencies:  Marie Curie Fellowship under 7th European Community Framework Programme [FP7-PEOPLE-2011-CIG, No 303854]

Available from: 2016-02-05 Created: 2016-02-05 Last updated: 2016-05-03
In thesis
1. Nonlinear and Nonparametric Dynamical Methods in Economics and Finance
Open this publication in new window or tab >>Nonlinear and Nonparametric Dynamical Methods in Economics and Finance
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The objectives of the thesis - which comprises six parts – can be summarized in i) implementing linear and nonlinear/nonparametric approaches toward detecting, measuring and analyzing the nature and directionality of causal relationships in financial markets, ii) elaborating on modern topics in financial investment analysis, iii) probing into the role of commodity futures in constructing optimal portfolios as well as iv) investigating growth dynamics via aggregated and disaggregated indices.

The first paper named “Analyzing causal interactions between sectoral equity returns and commodity futures returns in the aftermath of the global financial crisis: The case of the US and EU equity returns”, aims to explore and compare the dependence and co-movement structure between commodity and various asset classes’ returns including the USA and EU stock markets via the use of linear and non-linear causality testing in a comparative context with the additional adjustment for cointegration and conditional heteroscedasticity. The findings provide important implications for optimal asset allocation and portfolio diversification with respect to various market conditions, namely both in “good” and “bad” (crisis) times.

The second paper is entitled “On the time scale behaviour of Equity-Commodity links: Implications for Portfolio Management”, and has been published in the Journal of International Financial Markets, Institutions and Money (2016). The study is co-authored with Professors S. Bekiros, D.K. Nguyen, and B. Sjö. It develops a holistic framework for the investigation of the multi-horizon and intra-frequency causal directionalities of various asset classes, by means of multi-resolution analysis. The results verify the assumption that financial markets exhibit time-varying co-movement patterns, which are fundamentally important in a) generating profitable trading strategies according to different investor horizon expectations and b) decoding the financialization mechanism across various asset classes.

The third paper entitled “Business Cycle (de) Synchronization in the aftermath of the Global Financial Crisis: Implications for the Euro Area”, was published at Studies in Nonlinear Dynamics and Econometrics (2015) and is co-authored with S. Bekiros, D.K Nguyen and B. Sjö. In this work, the scale-dependent time-varying (de)synchronization effects between the Eurozone and the broad Euro area business cycles are revealed, before and after the global financial crisis. The results, which point towards an increased observed comovement during the crisis period for the Euro area, could be catalytic for the introduction of a more efficient monetary policy by EU institutions and in particular by the European Central Bank.

In the fourth paper, “Do financial stress and policy uncertainty have an impact on the energy and metals markets? A quantile regression approach”, which was published in the International Review of Economics and Finance (2016) and co-authored with J.C. Reboredo, the financial and policy uncertainty is investigated in relation to the price dynamics of energy and metal commodity futures’ markets. This work lead to the analysis of the asymmetric interrelationships with respect to changes in the perceptions of various risk measures, covering various periods, i.e., “normal” vs. “turbulent” such as upward or downward market episodes.

The fifth paper, co-authored with P. Andreasson, S. Bekiros and D.K. Nguyen, is entitled “The impact of speculation and economic uncertainty on commodity markets”, and is published in the International Review of Financial Analysis (2016). This paper attempts a novel methodological approach to measuring speculation in commodity markets, in particular whether market speculation drives agricultural commodity prices or viceversa. The assessment of the empirical analysis demonstrates that agricultural prices are not affected by speculation.

Finally, the sixth paper “Energy and Output Dynamics in Bangladesh”, co-authored with B.P. Paul, was published in Energy Economics (2011) and explores the relationship between energy utilization and economic growth in Bangladesh. Specifically, it deals with the important issue of whether energy consumption can be reduced without affecting economic growth while at the same time implicitly may lead to poverty reduction. The findings substantiate the fact that a) energy usage has become more efficient in recent times, as well as indicate that b) fluctuations in energy consumption did not have a significant impact on economic output.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2016. 15 p.
Series
Linköping Studies in Arts and Science, ISSN 0282-9800 ; 680
Keyword
Commodity markets, Nonlinear causality testing, Dependence structure, Business cycles, Timescale analysis, Growth dynamics, Portfolio management
National Category
Economics Economics and Business
Identifiers
urn:nbn:se:liu:diva-127340 (URN)10.3384/diss.diva-127340 (DOI)978-91-7685-768-7 (Print) (ISBN)
Public defence
2016-05-23, ACAS, Entrance 17, Building A, Campus Valla, Linköpiong, 10:15 (English)
Opponent
Supervisors
Available from: 2016-04-21 Created: 2016-04-21 Last updated: 2016-06-14Bibliographically approved

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