Cross-market linkages between commodities, stocks and bonds

Abstract

This article assesses the cross-market linkages between commodities, stocks and bonds in a cointegration framework during 1993–2011.

Keywords:

• cross-market linkages
• commodities
• stocks
• bonds
• cointegration

JEL Classification:

• C32
• C58
• G10
• Q02

Notes

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and opinions of BCV-AM.

¹ It is also possible that the signs of the ECTs are symmetrically opposed in this setting so as to reflect flight-to-quality episodes,i.e. the price of gold rises during periods of declining equity markets and vice versa.

¹ Stationarity is a central concern in time series analysis, which implies that the mean of the variable shall be time invariant (in the weak sense of stationarity). See Hamilton (1996) for further reference.

² Note, however, that the Johansen cointegration framework can be generalized to k variables.

³ Note that Lütkepohl et al. (2004) develop their analysis in the context where can be represented as a VAR(p), whose components are at most and cointegrated with rank r.