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Extreme connectedness of agri-commodities with stock markets and its determinants

Author

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  • Billah, Mabruk
  • Balli, Faruk
  • Hoxha, Indrit

Abstract

In this paper, we quantify the extreme connectedness between agricultural commodity prices with food and beverage stock market returns. We find that the connectedness of returns relies on the degree of the inverse shock, as suggested by the larger impact of the anticipated shock on the upper and lower tails than the estimated shock on the conditional mean. Additionally, the dynamics of the connectedness of returns monitored in the tail differ from the conditional mean. These two outcomes recommend that using conditional averages is limited and imprecise to analyze returns connected with extreme positive/negative events in agricultural commodities and food & beverage indices. Next, we find the determinants of the extent of the connectedness by employing firm level statistics. We find that some of the determinants driving the return spillovers at upper and lower quantiles are quite different from those driving the return spillovers at the middle quantile.

Suggested Citation

  • Billah, Mabruk & Balli, Faruk & Hoxha, Indrit, 2023. "Extreme connectedness of agri-commodities with stock markets and its determinants," Global Finance Journal, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:glofin:v:56:y:2023:i:c:s1044028323000194
    DOI: 10.1016/j.gfj.2023.100824
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    Citations

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    Cited by:

    1. Elsayed, Ahmed H. & Hoque, Mohammad Enamul & Billah, Mabruk & Alam, Md. Kausar, 2024. "Connectedness across meme assets and sectoral markets: Determinants and portfolio management," International Review of Financial Analysis, Elsevier, vol. 93(C).
    2. Xuewei Zhou & Zisheng Ouyang & Rangan Gupta & Qiang Ji, 2024. "Time-Varying Multilayer Networks Analysis of Frequency Connectedness in Commodity Futures Markets," Working Papers 202422, University of Pretoria, Department of Economics.
    3. Elsayed, Ahmed H. & Billah, Mabruk & Goodell, John W. & Hadhri, Sinda, 2024. "Examining connections between the fourth industrial revolution and energy markets," Energy Economics, Elsevier, vol. 133(C).
    4. Hector O. Zapata & Junior E. Betanco & Maria Bampasidou & Michael Deliberto, 2023. "A Cyclical Phenomenon among Stock & Commodity Markets," JRFM, MDPI, vol. 16(7), pages 1-13, July.

    More about this item

    Keywords

    Agricultural commodity prices; Food and beverage stock market returns; Quantile connectedness; Extreme market conditions;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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