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Short-term and long-term dependencies of the S&P 500 index and commodity prices
Stockholm University, Faculty of Social Sciences, School of Business.
2013 (English)In: Quantitative finance (Print), ISSN 1469-7688, E-ISSN 1469-7696, Vol. 13, no 4, 583-592 p.Article in journal (Refereed) Published
Abstract [en]

We utilize wavelet coherency methodology with simulated confidence bounds to examine the short-term and long-term dependencies of the returns for S&P 500 and the S&P GSCI® commodity index. Our results indicate no evidence of co-movement between S&P 500 total return and the S&P GSCI® commodity index total return in the short term, thereby suggesting diversification gains for equity investors. Importantly, this finding encompasses the onset of the current financial crisis. However, long-term diversification benefits, particularly after the onset of the recent financial crisis, are limited. We find, moreover, no consistent evidence of co-movements between S&P 500 and 10 individual sub-indexes of the S&P GSCI® commodity index. Of particular importance, we report weak co-movement of returns between S&P 500 and S&P GSCI® Precious Metals total return and S&P 500 and S&P GSCI® Softs at all frequencies, implying significant diversification gains both for short-term and long-term investors.

Place, publisher, year, edition, pages
2013. Vol. 13, no 4, 583-592 p.
Keyword [en]
commodity markets, comovement, applied finance, correlation modelling
National Category
Economics and Business
Research subject
Business Administration; Economics
Identifiers
URN: urn:nbn:se:su:diva-89285DOI: 10.1080/14697688.2013.768773ISI: 000317343300009OAI: oai:DiVA.org:su-89285DiVA: diva2:616896
Available from: 2013-04-19 Created: 2013-04-19 Last updated: 2017-12-06Bibliographically approved

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