Title: Spillover effects between commodity and stock markets: A state-dependent sensitivity expected shortfall (SDSES) approach
Authors: Laura Garcia-Jorcano - Universidad Complutense de Madrid (Spain) [presenting]
Lidia Sanchis - Univerity of Castilla la Mancha (Spain)
Abstract: A state-dependent sensitivity expected shortfall (SDSES) model is developed which enable us to quantify the direction, size, and persistence of risk spillovers among the United States (US) and Brazil, Russia, India, China (BRIC) stock market indices and different individual commodities as a function of the state of financial markets (tranquil, normal, and volatile). For eight sets of major stock and commodity markets (SP500, BRIC stock market index, US commodity market index, oil, copper, gold, wheat, and corn), we demonstrated that spillover effects are small during normal and tranquil states and those effects are of considerable size in the volatile state and are changeable over time. We obtained high and more significant spillovers and financialization process evidence in the volatile state after Lehman Brothers bankruptcy. Market stock indices appeared to play a major role in the transmission of shocks to other markets, especially from the SP500 to wheat in the post-Lehman Brothers bankruptcy period, whereas BRIC stock market index was one of the highest sources of tail risk spillover to the oil market in the post-Draghi speech period. Furthermore, we find that oil and agricultural markets are becoming more integrated after the global financial crisis.