US Futures Markets Interconnectedness During Crisis Periods

Abstract

This study contributes new empirical evidence on the interconnectedness of crude oil, precious metals, and financial futures during crisis/non-crisis periods. Dynamic spillovers from US to Europe and Asian futures markets are also examined. Empirical results show a significant and changing relationship among oil, gold, and financial futures, especially during the global financial crisis. Dynamic analysis (rolling window and subsamples) demonstrates that crude oil markets become notably more inuential during the crisis, while gold turns from a net giver, in the pre- and post-crisis periods, to a net receiver during turbulent times. West Texas Intermediate and Brent provide valuable information about return dynamics, while S&P500 and FTSE100 play a key role in volatility spillovers. Asian futures markets are strongly influenced by changes in the US and UK oil and stock futures markets. Finally, using different permutations of Cholesky orderings (Klobner and Wagner, 2013), provides additional support that the spillover index for both return, and volatility is overestimated when the generalized forecast error decompositions are employed