Copula-Based Local Dependence Among Energy, Agriculture and Metal Commodities Markets

42 Pages Posted: 4 Mar 2020 Last revised: 2 Apr 2020

See all articles by Claudiu Albulescu

Claudiu Albulescu

Politehnica University of Timisoara

Aviral Kumar Tiwari

Rajagiri Business School; IFHE University (ICFAI) - Faculty of Management

Qiang Ji

Chinese Academy of Sciences (CAS) - Institute of Policy and Management

Date Written: March 31, 2020

Abstract

This paper studies the extreme dependencies among energy, agriculture and metal commodities markets, with an emphasis on local co-movements. By applying a novel, copula-based, local Kendall’s tau approach to measure nonlinear local dependence in regions, we identified asymmetric co-movements in and between bull and bear markets, as well as the changing trend in the degree of co-movements. Starting from a non-parametric mixture copula, we found that commodities markets’ co-movements increase in extreme situations. In addition, we found a stronger dependence between energy and other commodities markets at lower tails. Therefore, we showed that the energy market can offer diversification solutions for risk management in the case of extreme bull market events.

Keywords: energy prices, commodity markets, local dependence, co-movements, mixture copula, local Kendall’s tau

JEL Classification: C22, G11, G15, Q40

Suggested Citation

Albulescu, Claudiu and Tiwari, Aviral Kumar and Ji, Qiang, Copula-Based Local Dependence Among Energy, Agriculture and Metal Commodities Markets (March 31, 2020). Available at SSRN: https://ssrn.com/abstract=3530758 or http://dx.doi.org/10.2139/ssrn.3530758

Claudiu Albulescu (Contact Author)

Politehnica University of Timisoara ( email )

P-ta Victoriei, no. 2
Timisoara, Timis 300006
Romania

HOME PAGE: http://https://sites.google.com/site/claudiutiberiualbulescu/

Aviral Kumar Tiwari

Rajagiri Business School ( email )

Kochi, 682039
India

IFHE University (ICFAI) - Faculty of Management ( email )

India

Qiang Ji

Chinese Academy of Sciences (CAS) - Institute of Policy and Management ( email )

No.15 ZhongGuanCun BeiYiTiao Alley
Haidian District
Beijing, 100190
China

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