Do Volatilities Matter in the Interconnectedness between World Energy Commodities and Stock Markets of BRICS?. (23rd April 2022)

• Record Type: Journal Article
• Authors: Amoako, Gilbert K.; Asafo-Adjei, Emmanuel; Mintah Oware, Kofi; Adam, Anokye M.
• Other Names: Gherghina Stefan Cristian Academic Editor.
• Is Part Of: Discrete dynamics in nature and society. Volume 2022(2022)
• Publication Date: 2022-04-23
• Subjects: System analysis -- Periodicals; Dynamics -- Periodicals; Chaotic behavior in systems -- Periodicals; Differentiable dynamical systems -- Periodicals; 003.05
• DOI: 10.1155/2022/1030567
• Languages: English
• ISSNs: 1026-0226

Abstract

Abstract : Financial markets integration has resulted in high interconnectedness among the BRICS stock markets, which minimizes diversification potentials. This has increased investors' interest in the financialization of commodities to minimize their portfolio risks. However, the comovements between these assets do not operate in a vacuum, which requires that the role of volatilities be considered in tandem. The purpose of this study is to explore the interdependencies between energy commodities and stock markets of BRICS in the midst of relevant volatilities. For this reason, the wavelet techniques, biwavelet and partial wavelet, are employed. We find that positive comovements between energy commodities and stock markets of BRICS become stronger in the long-term. Furthermore, volatility has a long-term impact on the correlations between energy commodities and the BRICS stock market. We argue that the US Volatility Index, which measures investor anxiety and volatility in stock markets, has the biggest impact on the relationship between energy commodities and BRICS stock markets. Surprisingly, the correlations between energy commodities and Russian stock markets were strong enough to withstand the effects of volatilities. Hence, investors can use volatilities to hedge portfolio risks in energy commodities and stock markets in Brazil, India, China, and South Africa.