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Copula-based local dependence among energy, agriculture and metal commodities markets

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  • Albulescu, Claudiu Tiberiu
  • Tiwari, Aviral Kumar
  • Ji, Qiang

Abstract

This paper studies the extreme dependencies among energy, agriculture and metal commodities markets, with an emphasis on local co-movements. By applying a novel, copula-based, local Kendall’s tau approach to measure nonlinear local dependence in regions, we identified asymmetric co-movements in and between bull and bear markets, as well as the changing trend in the degree of co-movements. Starting from a non-parametric mixture copula, we found that commodities markets’ co-movements increase in extreme situations. In addition, we found a stronger dependence between energy and other commodities markets at lower tails. Therefore, we showed that the energy market can offer diversification solutions for risk management in the case of extreme bull market events.

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  • Albulescu, Claudiu Tiberiu & Tiwari, Aviral Kumar & Ji, Qiang, 2020. "Copula-based local dependence among energy, agriculture and metal commodities markets," Energy, Elsevier, vol. 202(C).
    • Handle: RePEc:eee:energy:v:202:y:2020:i:c:s0360544220308690
    DOI: 10.1016/j.energy.2020.117762
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    More about this item

    Keywords

    Energy prices; Commodities markets; Local dependence; Co-movements; Mixture copula; Local Kendall’s tau;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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