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Rare Earth Market, Electric Vehicles and Future Mobility Index: A Time-Frequency Analysis with Portfolio Implications

Author

Listed:
  • Inzamam Ul Haq

    (Knowledge Unit of Business Economics Accountancy and Commerce, University of Management and Technology, Sialkot Campus, Sialkot 51310, Pakistan)

  • Paulo Ferreira

    (VALORIZA—Research Center for Endogenous Resource Valorization, 7300-555 Portalegre, Portugal
    Instituto Politécnico de Portalegre, 7300-110 Portalegre, Portugal
    Centro de Estudos e Formação Avançada em Gestão e Economia da Universidade de Évora (CEFAGE-UE), Universidade de Évora, Largo dos Colegiais 2, 7004-516 Évora, Portugal)

  • Apichit Maneengam

    (Department of Mechanical Engineering Technology, College of Industrial Technology, King Mongkut’s University of Technology North Bangkok, Wongsawang, Bangsue, Bangkok 10800, Thailand)

  • Worakamol Wisetsri

    (Department of Social Science, Faculty of Applied Arts, King Mongkut’s University of Technology North Bangkok (KMUTNB), Bangkok 10800, Thailand)

Abstract

This study investigates the co-movements between the Solactive Electric Vehicle and Future Mobility Index (EVFMI) and multiple rare earth elements (REEs). We applied a TVP-VAR model and bivariate wavelet coherence approach to capture co-movements both in the time and frequency domain considering short-, medium- and long-term investment horizons. Using daily returns from 1 June 2012 to 4 June 2021, the results of the TVP-VAR model show that individual REEs and the EVFMI have strong return connectedness and are heterogenous over time. The bivariate wavelet coherence approach reveals that Dysprosium, Neodymium, Praseodymium and Terbium returns have positive co-movement (in-phase) with the EVFMI in the medium-term and long-term. In contrast, Cerium, Europium, Lanthanum and Yttrium returns have negative co-movements (out-phase) with the EVFMI in the medium-term and long-term. We find strong positive co-movements between the MVIS Global Rare Earth/Strategic Metals Index (MVREMX) and EVFMI at multiple wavelet scales. Following the lead/lag relationship, Cerium, Europium and Lanthanum, Yttrium returns are leading the EVFMI, and Neodymium, Dysprosium, Praseodymium, Terbium and MVREMX returns are lagging to the EVFMI. This study, therefore, suggests heterogenous hedging and diversification properties of REEs over time and investment horizons. Specifically, Cerium, Europium, Lanthanum and Yttrium act as strong hedges in long-term investment horizons and Neodymium, Dysprosium, Praseodymium and Terbium are weak hedges or diversifiers in short-term investment horizons. These results may be of particular interest to investors and relevant to policymakers considering multiple investment horizons.

Suggested Citation

  • Inzamam Ul Haq & Paulo Ferreira & Apichit Maneengam & Worakamol Wisetsri, 2022. "Rare Earth Market, Electric Vehicles and Future Mobility Index: A Time-Frequency Analysis with Portfolio Implications," Risks, MDPI, vol. 10(7), pages 1-20, July.
    • Handle: RePEc:gam:jrisks:v:10:y:2022:i:7:p:137-:d:857035
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    References listed on IDEAS

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    Cited by:

    1. Cagli, Efe Caglar, 2023. "The volatility spillover between battery metals and future mobility stocks: Evidence from the time-varying frequency connectedness approach," Resources Policy, Elsevier, vol. 86(PA).
    2. Inzamam UI Haq & Hira Nadeem & Apichit Maneengam & Saowanee Samantreeporn & Nhan Huynh & Thasporn Kettanom & Worakamol Wisetsri, 2022. "Do Rare Earths and Energy Commodities Drive Volatility Transmission in Sustainable Financial Markets? Evidence from China, Australia, and the US," IJFS, MDPI, vol. 10(3), pages 1-22, September.

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