Global Equity-Commodity Market Correlations: Financial Crises and Broken Trends
50 Pages Posted: 16 Jan 2013
Date Written: January 17, 2013
We show 90 equity-commodity market correlations around the world have fluctuated about their respective broken trends since the early 1990s. Each of past eight major financial crises has precipitated breaks in the levels/slopes of some correlation trends, and each correlation trend has been broken by at least one of the eight crises. Recent financial crises display greater and wider trend-breaking impacts than early financial crises, notably in a way of uplifting the trends drastically. Most correlation trends exhibit positive slopes throughout, and some over the late sample period. Our results constitute compelling evidence that high equity-commodity market correlations can be a long-run phenomenon and will persist until next, yet rare, downward trend-breaking shocks originate.
Keywords: commodity index, equity index, correlation trend, financial crisis, structural break
JEL Classification: G01, G11, C22
Suggested Citation: Suggested Citation