A Volatility Spillover Analysis between Bond and Commodity Markets as an Indicator for Global Liquidity Risk

Kirkpinar A., EVRİM MANDACI P.

Panoeconomicus, cilt.70, sa.1, ss.71-100, 2023 (SSCI, Scopus) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 70 Sayı: 1
  • Basım Tarihi: 2023
  • Doi Numarası: 10.2298/pan180811011k
  • Dergi Adı: Panoeconomicus
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, ABI/INFORM, Central & Eastern European Academic Source (CEEAS), EconLit, PAIS International, Directory of Open Access Journals
  • Sayfa Sayıları: ss.71-100
  • Anahtar Kelimeler: Volatility spillover, Bond markets, DCC-GARCH, Copula DCC-GARCH, Hong causality test
  • Dokuz Eylül Üniversitesi Adresli: Evet

Özet

This study aims to analyze the volatility spillover between bond and commodity markets in terms of global liquidity risk. The data covers the daily closing prices of bond markets in specified countries-Brazil, Russia, India, China, and Turkey-and certain commodities-gold and oil-for the period January 2008 to January 2022. We utilized the DCC-GARCH model to analyze volatility spillover between these markets and the Copula DCC-GACRH model to determine dependence structures between them. Additionally, we applied the Hong Causality in Variance Test to determine the direction of the causal relationships between these markets. Our empirical findings indicate the existence of significant volatility spillovers between gold and most of these bond markets (Brazil, China, Russia, and Turkey), and between oil and some of these bond markets (Russia, India and Turkey). Our results indicate a limited diversification benefit for investors and portfolio managers.