COVID-19 and the quantile connectedness between energy and metal markets

COVID-19 pandemic, Russia-Ukraine conflict and shale gas development: Evidence from fractional integration

Although there are papers on the persistence of energy series including the persistence of shale gas, the impact of recent developments such as the Covid-19 pandemic and Russia-Ukraine conflict have been rarely explored in the existing literature. This paper examines the structure of shale gas production in the U.S. by looking at the degree of persistence across different areas, with the aim to determine if shocks in the series are permanent or transitory. Using fractional integration methods (which unlike the conventional methods, allow for the determination of the persistence of energy and non-energy series in a robust manner), and different subsamples that include the Covid-19 pandemic and the Russia-Ukraine war, our results indicate that there is a substantial decrease in the integration order in the total shale gas production in the U.S. as well as in four other plays-Haynesville, Permian, Utica and Eagle Ford. However, no differences are observed with respect to the Russia-Ukraine war. There is another group of four series (Marcellus, Niobrara-Codell, Woodford and Rest of US 'shale') with a very small reduction in the degree of persistence and another group of three series with almost no reduction at all in the order of integration (Barnett, Mississippian and Fayetteville). Several implications in terms of policy are reported at the end of the manuscript.

Dynamic connectedness and network in the high moments of cryptocurrency, stock, and commodity markets

This study examines the connectedness in high-order moments between cryptocurrency, major stock (U.S., U.K., Eurozone, and Japan), and commodity (gold and oil) markets. Using intraday data from 2020 to 2022 and the time and frequency connectedness models of Diebold and Yilmaz (Int J Forecast 28(1):57-66, 2012) and Baruník and Křehlík (J Financ Econom 16(2):271-296, 2018), we investigate spillovers among the markets in realized volatility, the jump component of realized volatility, realized skewness, and realized kurtosis. These higher-order moments allow us to identify the unique characteristics of financial returns, such as asymmetry and fat tails, thereby capturing various market risks such as downside risk and tail risk. Our results show that the cryptocurrency, stock, and commodity markets are highly connected in terms of volatility and in the jump component of volatility, while their connectedness in skewness and kurtosis is smaller. Moreover, jump and volatility connectedness are more persistent than that of skewness and kurtosis connectedness. Our rolling-window analysis of the connectedness models shows that connectedness varies over time across all moments, and tends to increase during periods of high uncertainty. Finally, we show the potential of gold and oil as hedging and safe-haven investments for other markets given that they are the least connected to other markets across all moments and investment horizons. Our findings provide useful information for designing effective portfolio management and cryptocurrency regulations.

Quantile connectedness in agri-commodity markets: What has changed over past six decades?

Agri commodities have been investigated in the past to determine their inter-relationships. However, no study has checked their risk spillover/connectedness for six decades using extreme quantiles. Various shocks (positive/negative) often pose challenges to these commodities over the past six decades. Such shocks' impact is usually observed in extreme quantiles or tails. Therefore, we have investigated fourteen agri commodities (namely Coffee, Cocoa, Soyabean, Wheat, Sugar, Orange, Chicken, Beef, Maize, Tea, Coconut Oil, Groundnut Oil, Palm Oil & Rice) from January 1, 1960 to June 1, 2022 (covering 62 years on a monthly basis), deploying Quantile VAR or QVAR as suggested by [1](extended [2,3] calibration). We found that the risk spillover/connectedness never came down for these Agri commodities. It is always at a higher level (more than 55%) proving that agri commodities remain vulnerable to various shocks throughout. Spillover looks symmetric as both the extreme tails enjoy about 92-93% connectedness levels, whereas the median is below 60%. Rice, Orange Juice, Chicken, Tea and Groundnut Oil were consistent net receivers across such a long-time frame, whereas Palm Oil, Soyabeans, Maize and Wheat were net emitters all through. Further, we found decreasing complexity (network connectedness reduction) with increased quantiles. Since these findings are over such an extended period, policy decisions can be made based on them.