Revisiting the pricing impact of commodity market spillovers on equity markets

Pinto, Francisco, Bowe, Michael and Hyde, Stuart 2024. Revisiting the pricing impact of commodity market spillovers on equity markets. Journal of Commodity Markets 33 , 100369. 10.1016/j.jcomm.2023.100369

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Abstract

This paper revisits the dynamics of pricing relationships between commodity and equity markets in a sample of commodity-exporting economies between 2000–2023. We confirm the correlation between these asset prices increases around episodes of financial distress. Prior research attributes this increase to the effects of contagion initiated by commodity price shocks. However, we find that after controlling for the effect of time varying risk aversion and investor sentiment, there is no evidence that the documented correlation increase originates from commodity market shocks. Indeed, we are unable to reject the hypothesis of no contagion. We maintain that controlling for the influence of time varying risk aversion and investor sentiment, together with other factors which potentially cause common variation across price movements in commodity and equity markets, is essential to accurately capturing the relationship between asset prices in these markets.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	2405-8513
Date of First Compliant Deposit:	4 December 2023
Date of Acceptance:	10 November 2023
Last Modified:	05 Dec 2023 11:01
URI:	https://orca.cardiff.ac.uk/id/eprint/164505

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