Essays on commodity market uncertainties : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Albany, New Zealand
Loading...
Date
2019
DOI
Open Access Location
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Massey University
Rights
The Author
Abstract
This dissertation presents three essays on commodity market uncertainties. Fundamentally, uncertainty relates to a decrease in investment and reduction in the production of goods and services that causes a momentary decline in aggregate output as well as employment. Hence, the increase in uncertainty has a pervasive impact on the aggregate income received by all the factors of production in an economy.
In the first study, we measure the daily price uncertainty of 22 commodities and analyze the time and frequency connectedness among them. Applying spillover analysis and network graphs, we find that overall connectedness among commodity uncertainties increase during the global financial crisis (GFC) and the oil price collapse of 2014-16. Network analysis shows more spillover within a specific commodity class, and that precious metals due to less spillover with other commodities may serve as safe-haven during the crisis. The decomposition of the spillover index reveals that commodity markets are more connected in the long-run.
The second study builds on the energy – stock nexus by investigating the impact of energy commodity uncertainties on the systematic risk of twelve industries in the US. The dynamic betas indicate that real estate, financials, and basic materials are the high-risk industries. Notably, the systematic risk of the oil and gas sector was significantly affected during the Global Financial Crisis (GFC) and the Shale Oil Revolution (SOR) sub-periods. Our results provide convincing evidence of the positive impact of energy uncertainties on basic material, basic resources, financials, oil and gas, and real estate. On the other hand, we identify the negative impact on consumer goods, consumer services, health care, industrials, and technology industries.
Finally, our third study investigates the causal impact of global factors as drivers of transmission between oil and other commodity markets using the commodity uncertainty indexes. We estimate strong bi-directional transmission between oil and metal (agriculture) markets. Our analysis also suggests that oil is a net transmitter to other commodity uncertainties, and this transmission significantly increased during the period of the global financial crisis. The use of linear and nonlinear causality tests indicates that the global factors have a causal effect on the overall connectedness, especially on the total transmission from oil to other commodity uncertainties. Further segregation of transmissions between oil to individual commodity markets indicates VIX, TED spread, and EPU as the most influential drivers of connectedness among commodity markets.
Description
Listed in 2020 Dean's List of Exceptional Theses
Keywords
Primary commodities, Prices, Commodity exchanges, Risk assessment, Dean's List of Exceptional Theses