Stock, foreign exchange and commodity markets linkages: Implications for risk diversification and portfolio management

IF 5.5 2区经济学 Q1 BUSINESS, FINANCE Global Finance Journal Pub Date : 2024-11-02 DOI:10.1016/j.gfj.2024.101053

Jorge A. Muñoz Mendoza , Carmen L. Veloso Ramos , Carlos L. Delgado Fuentealba , Edinson E. Cornejo Saavedra , Sandra M. Sepúlveda Yelpo

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Abstract

We analyze connectedness for a system composed of 111 financial markets from January 3, 2011, to December 29, 2023. Stock, foreign exchange, and commodity markets are included in the sample. Using a two-stage approach based on Principal Component Analysis to remove common global factors affecting financial market returns, we employ a LASSO-VAR model to estimate the global network of financial markets. Our results reveal that financial markets are closely linked. Common global factors intensify spillovers between financial markets. After being removed, financial markets transmit significant idiosyncratic shocks that are not explained by systemic variations. Our results also allow us to accurately identify the markets that are idiosyncratically less vulnerable to liquidity shocks, and those that are most relevant transmitting this kind of disturbances. These findings are relevant for investment decisions, risk management, and financial regulators.

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股票、外汇和商品市场的联系：对风险分散和投资组合管理的影响

我们分析了 2011 年 1 月 3 日至 2023 年 12 月 29 日期间由 111 个金融市场组成的系统的连通性。样本包括股票、外汇和商品市场。我们采用基于主成分分析的两阶段方法来剔除影响金融市场收益的全球共同因素，并采用 LASSO-VAR 模型来估计全球金融市场网络。我们的研究结果表明，金融市场是紧密联系在一起的。全球共同因素加剧了金融市场之间的溢出效应。剔除这些因素后，金融市场仍会传递系统性变化无法解释的重大特异性冲击。我们的研究结果还使我们能够准确地识别出哪些市场不易受到流动性冲击的特异性影响，以及哪些市场最容易传播此类干扰。这些发现对投资决策、风险管理和金融监管机构都有意义。

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来源期刊

Global Finance Journal BUSINESS, FINANCE-

CiteScore

7.30

自引率

13.50%

发文量

106

审稿时长

53 days

期刊介绍： Global Finance Journal provides a forum for the exchange of ideas and techniques among academicians and practitioners and, thereby, advances applied research in global financial management. Global Finance Journal publishes original, creative, scholarly research that integrates theory and practice and addresses a readership in both business and academia. Articles reflecting pragmatic research are sought in areas such as financial management, investment, banking and financial services, accounting, and taxation. Global Finance Journal welcomes contributions from scholars in both the business and academic community and encourages collaborative research from this broad base worldwide.