Network connectedness and net spillover between financial and commodity markets

• Published in: The North American journal of economics and finance Vol. 48; pp. 801 - 818
• Main Authors: Yoon, Seong-Min, Al Mamun, Md, Uddin, Gazi Salah, Kang, Sang Hoon
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.04.2019
• Subjects: Assets classes; Network connectedness; Portfolio management; Return spillover; Network connectedness; Assets classes; C58; G15; F37; G14; Return spillover; Portfolio management; Q31
• ISSN: 1062-9408; 1879-0860
• DOI: 10.1016/j.najef.2018.08.012

•We quantify the net pairwise spillover return connectedness among stock, currency, bond, and commodity markets.•We perform both static and dynamic analyses to calculate spillover return connectedness.•S&P 500 is the largest contributor of return spillover shocks for Asia-Pacific stock markets.•SSEC, NIkei225, All Ords, and KOSPI are largest recipient of return spillover shocks.•Our result provides specific information for investor diversification decision. We extend the prior literature on market connectedness and spillover by quantifying the size of return connectedness across markets (assets). Applying the network spillover methodology, we perform both static and dynamic analyses to quantify the net spillover shock transmission from one market to another market (stock, bond, currency, and commodities) from December 1999 to June 2016. Thus, we measure the net pairwise spillover and assess the net directional connectedness for each market (asset class). Finally, our visual depiction of a network connectedness framework provides specific information on portfolio strategies for cross-border portfolio managers.