Modelling Time Varying Volatility Spillovers and Conditional Correlations Across Commodity Metal Futures
34 Pages Posted: 1 Oct 2015 Last revised: 22 Sep 2021
Date Written: October 17, 2017
This paper examines how the most prevalent stochastic properties of key metal futures returns have been affected by the recent financial crisis using both mapped and unmapped data. Our results suggest that copper and gold futures returns exhibit time-varying persistence in their corresponding conditional volatilities over the crisis period; in particular, such persistence increases during periods of high volatility compared with low volatility. The estimation of a bivariate GARCH model further shows the existence of time-varying volatility spillovers between these returns during the different stages of such a crisis. Our results, which are broadly the same in relation to the use of mapped or unmapped data, suggest that the volatilities of copper and gold are inherently linked, although these metals have very different applications.
Keywords: Financial Crisis, Metal Futures, Structural Breaks, Time-Varying Volatility
JEL Classification: C32, Q02
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