Title: Co-movement between commodity and equity markets revisited: An application of the Thick Pen method
Authors: Sania Wadud - The University of Aberdeen (United Kingdom) [presenting]
Marc Gronwald - International Business School Suzhou (China)
Robert B Durand - Curtin University (Australia)
Seungho Lee - University of Aberdeen (United Kingdom)
Abstract: The purpose is to analyse interdependence between the returns of a number of energy and non-energy commodities on the one hand and equities on the other based on Thick Pen Transform (TPT) methods: (i) Thick Pen Measure of Association (TPMA) and (ii) Multi-Thickness Thick Pen Measure of Association (MTTPMA). These metrics can be used to capture time-varying co-movement and co-movement across different time scales: this facilitates the analysis of the short-term and long-term features of the time series using both stationary/non-stationary data. Among the key findings is that, when considering long-term co-movement, energy index futures show an increase in co-movement with equities since the beginning of the financialisation period. There are asymmetric effects in cross-scale co-movement between various commodities and equities. The weak co-movement between equity and off-index futures, livestock and soybean-based commodities indicates diversification benefits for both short-term and long-term investors.