Mineral Metamorphosis: Tracing the static and dynamic nexus between minerals and global south markets

The Global South, comprising nations in Africa, Asia, and Latin America, has emerged as a dynamic economic force marked by shared challenges and aspirations for self-reliance. This study examines the return connectedness between mineral markets and equity markets in the context of the Global South. We employed the contemporaneous and lagged R2 decomposed connectedness approach to explore the return spillover between our variables of interest. Key findings of our study suggest that equity markets and mineral sectors in the Global South are strongly interconnected and there is a significant transmission of return spillover from minerals to equity markets of Global South economies. Accordingly, dynamic connectedness between equity markets and minerals reflects the temporal nature of connectedness. Contemporaneous connectedness emphasizes immediate return volatility, influenced by current factors, while lagged connectedness reflects historical return spillover effects. These findings have substantial implications for portfolio management, indicating that energy tokens can effectively mitigate risk and enhance portfolio performance. Additionally, minerals emerge as a potential avenue for diversification and can act as a hedge during periods of market uncertainty. Notably, our analysis indicates low hedging ratios, signifying the relatively cost-effective nature of hedging portfolio risks through selected minerals. These insights provide valuable guidance to investors seeking to integrate minerals into their Global South market portfolios.