Dynamic return and volatility spillovers among S&P 500, crude oil, and gold

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Balcilar M., Ozdemir Z. A., Ozdemir H.

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, vol.26, no.1, pp.153-170, 2021 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 26 Issue: 1
  • Publication Date: 2021
  • Doi Number: 10.1002/ijfe.1782
  • Journal Name: INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, Aerospace Database, Business Source Elite, Business Source Premier, Communication Abstracts, EconLit, Geobase, Metadex, vLex, Civil Engineering Abstracts
  • Page Numbers: pp.153-170
  • Keywords: Financial and commodity markets, quantile VAR (QVAR), spillovers, vector autoregression, variance decomposition, NONPARAMETRIC QUANTILE CAUSALITY, IMPULSE-RESPONSE ANALYSIS, STOCK-MARKET, TIME-SERIES, SAFE-HAVEN, RISK SPILLOVER, PRECIOUS-METAL, GRANGER CAUSALITY, UNIT-ROOT, DEPENDENCE
  • Ankara Haci Bayram Veli University Affiliated: Yes

Abstract

This article examines the return and volatility spillover effects among the S&P 500, crude oil, and gold by employing the spillover index of Diebold and Yilmaz (2012). Monthly realized volatility and return series covering the period from January 1986 to August 2018 are used to examine the return and volatility spillovers. Our findings indicate a bidirectional return and volatility spillover among these assets. The full sample empirical evidence is consistent with the structure in which oil plays a central role in the information transmission mechanism. The role of oil and gold as a safe haven has changed over time in financial and nonfinancial economic turbulence time-span. Commodity market financialization has decreased the effectiveness of adding commodities to portfolios after 2002. We find that return spillover is much higher both with considerable negative and positive larger shocks than average shocks, corresponding to left and right tails of the conditional distribution, respectively, while volatility spillover is higher only with positive large shocks than average shocks, which corresponds to shock in the right tail.