Global financial crisis and rising connectedness in the international commodity markets

Dayong Zhang, David C. Broadstock

Research output: Journal article publicationJournal articleAcademic researchpeer-review

48 Citations (Scopus)

Abstract

This paper documents a dramatic change in the nature of connectedness in global commodity prices following the 2008 global financial crisis. We show that co-dependence in price-changes among seven major commodity classes goes from a pre-crisis average of 14.82% to a strikingly larger average of 47.87% in the period following the crisis, and which has endured until now. Dynamic swings in price co-movements of such a scale present a clear concern for financial investors and are of immediate interest to a wider policy-maker audience. Of particular interest is the empirical behavior of the food commodity price index, whose contribution to the system dynamics rises from less than 20% in the period up to 2008, to more than 80% after. To dispel any concern that these finding may be method-specific, we demonstrate their invariance to modeling procedure by providing analogous-results using a pairwise Granger causality analysis, as well as different sub-sampling choices.

Original languageEnglish
JournalInternational Review of Financial Analysis
DOIs
Publication statusAccepted/In press - 1 Jan 2018

Keywords

  • Commodity
  • Connectedness
  • Financial crisis

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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