Asymmetric multi-scale systemic risk spillovers across international commodity futures markets: The role of infectious disease uncertainty

This paper investigates the role of infectious disease uncertainty on multi-scale risk spillovers and portfolio implications across 12 international commodity futures markets from January 2006 to August 2022. We use wavelet packet decomposition and a novel risk spillover network topology approach based on a smooth transition vector autoregression model. The main findings are summarized as follows. First, there is an obvious asymmetry in spillover effects, i.e., the intensity of risk spillovers increases significantly during periods of high infectious disease uncertainty, and clear evidence of time-varying total spillovers across various regimes and frequencies. Second, cross-category risk spillovers are more pronounced in high-uncertainty regimes, while risk networks tend to cluster within the same category during low-uncertainty regimes. Third, the role of commodity futures in the risk spillover networks varies across different time scales and regimes, with gold consistently acting as a stable net risk transmitter. We also develop optimal portfolio strategies across commodity futures markets at different time scales and regimes based on the risk spillover analysis.