How do Carbon 
Emissions Spillovers Reshape Metal Market Dynamics? Time–
Frequency Insights on Precious and Non-precious Metals

Younis I., Du A.M., Gupta H., Shah W.U.

Baber H., Shaik M., Gupta H.

The objective of the study was to examine the effects of the COVID-19 pandemic on India’s economy. The analysis focused on several economic metrics, including stock market prices, the rupee’s value in relation to the US dollar, economic activity, the unemployment rate, and the rate of inflation. Contrary to popular belief, the results demonstrate that during the first wave (25 March 2020 to 16 September 2020), the increasing number of cases had a beneficial influence on economic activity and a negative impact on the unemployment rate. The second wave, which lasted from 15 March 2021 to 17 July 2021, was considerably stronger and demonstrated how confirmed instances had a significant detrimental impact on inflation rates and stock values. Contrary to expectations, the third wave (December 28, 2021, to January 30, 2022) was found to be less intense. Overall, the report shows how the pandemic affected India’s economy during each of the three waves and notes that there have been encouraging signs of recovery during the return to normalcy phase. The government, scholars, policymakers, and economists will find this study useful in understanding how the COVID-19 Pandemic affected the Indian economy and in coming up with ideas for future risk mitigation measures.

Gupta H., Katoch R., Gupta M.

This chapter examines the transfer of daily volatility returns from one block-chain asset to another and hedging alternatives. The technique is based on adequately modelling of the dynamic conditional correlation of generalised autoregressive conditional heteroscedasticity (DCC GARCH) and the hedging ratio. The results reveal that the volatility spillover impact from Etherium to other block-chain assets exists both in the short and long run. There are also hedging possibilities available between the selected block-chain assets. This implies that, prior to investing, policymakers, regulators, and investors should be aware of volatility, spillover effects, and hedging alternatives in the constituent variables.

Goutte S., Mhadhbi M.

The world continues to face major economic challenges due to crises that have a considerable impact on energy consumption. Since the global energy crisis, energy commodity costs have risen, and economic slowdowns in various regions continue to influence electricity market trends.Clean energy markets, propelled by the growing interest of economic entities and investors, are now interconnected with several commodity markets. In this context, energy metals play a crucial role in influencing the dynamics of the clean energy and particularly electricity markets. This study takes a close look at the complex interconnections between clean energy indices and the metals market, focusing on volatility dynamics. Drawing on advanced methodologies, including the Diebold and Yilmaz method, we unveil the complex relationships that link these markets. Our results reveal distinct patterns and interactions, highlighting the nuanced nature of the connection between clean energy indices and metal prices. The insights revealed have significant implications for policymakers and investors seeking to align their strategies with sustainable energy transitions and ensure financial stability. By enhancing our understanding of the interdependencies between clean energy indices and metals markets, this research provides valuable guidance for navigating the changing clean energy investment landscape.

Gupta H.

In a country, the financial markets depend on several economic factors. One of these important factors is the export of the country. The stock index of the country tends to be raised due to the exports, though it may occur after some time rather than immediately. In this study, an attempt has been made to predict the best model of volatility in top export countries, Germany, China, the United States, Japan and Hong Kong by taking into account the closing price of the stock index of the sampled countries for a period ranging from the year 2000 to 2020. The returns from the stock markets are asymmetric; negative returns are found to be followed by a greater increase in volatility than the corresponding positive returns. Therefore, both symmetric and asymmetric generalised autoregressive conditional heteroscedasticity (GARCH) models have been applied to predict the volatility. The symmetric model used is GARCH (1,1) and asymmetric models used in the study are exponential GARCH (1,1) and GJR-GARCH (1,1). The study shows that EGARCH model has outperformed the GARCH and GJR-GARCH models in estimating the volatility in four stock indices ( Hanif & Pok, 2010 ; Kışınbay, 2010 ; Lin, 2018 ), and GJR-GARCH has outperformed in estimating volatility in one stock index ( Oberholzer & Venter, 2015 ; Shamiri & Hassan, 2007 ). The benefit of this study is to help portfolio managers, investors and corporations in making investment-related decisions. JEL Codes: C20, C31, C58, G12

Nepal R., Yadav M.P., Katoch R., Gupta H., Kumar A.

Carbon emissions, a fast-moving environmental problem, is truly becoming an overarching international financial sensation. The carbon emission challenges faced during the COVID-19 and Russia Ukraine War adversely affected forex market. This paper attempts to unravel the frequency co-movement of carbon emissions with forex market. We consider daily observation of carbon emissions (CE) and forex market proxied by Euro (EUR), Japanese Yen (JPY), British Pound Sterling (GBP), Australian Dollar (AUD) and Canadian Dollar (CAD) against United States Dollar (USD). These currencies exchange rates are analyzed since their volatility and trading have been particularly high. We collect daily observation of these markets extending form December 31, 2019 to February 10, 2023 and employ wavelet analysis for the empirical computation. The result unfolds that there is a strong and positive co-movement between carbon emissions and exchange rate during the COVID-19 period in the long run for CAD, AUD, GBP and weak for EUR and JPY. However, JPY is in anti-phase relationship with carbon emission in 128–256 frequencies. In addition, JPY leads the relationship during COVID-19 outbreak and Russia-Ukraine invasion respectively. This study ventures to offer insight to the policy analyst, investors and portfolio managers.

Raza S.A., Guesmi K., Benkraiem R., Anwar R.

The contemporary conflict between two countries Russia and Ukraine has caused intensification in the increasing prices of commodities and energy owing to the supply chain disruption and the sanctions imposed on both countries. The previous literature has validated that Russia-Ukraine conflict substantially affects financial and economic operations of other countries. Therefore, the key aim of conducting this study is to inspect the dynamic spillover connectedness between the four leading precious metals (such as Gold, Palladium, Platinum, and Silver) and seven major currency markets (including Euro, British Pound, Australian Dollar, Swiss Franc, Japanese Yen, Canadian Dollar, and Chinese Yuan). The study includes the dataset from 24 January 2022 to 31 May 2022 to cover the inflationary period. Accordingly, the Time-Varying Parameter Vector Autoregression framework is applied. Granger linear causality and BDS nonlinear causality techniques are also employed to examine the causal effect of geopolitical risk in aforementioned connectedness. The findings reveal that Platinum has a strong spillover towards all the considered currencies except the Japanese Yen. The increasing demand for Platinum during the conflict secured it to receive the spillover. While the Japanese Yen is a net transmitter of spillover indicating the Japanese Yen as sturdiest currency during the conflict. The causality test reveals that geopolitical risk causes spillover connectedness across the precious metals and the currency markets during inflationary period. This study is significant for policymakers, investors, and portfolio managers while developing strategies or making critical investment decisions.

Katoch R., Batra S.

Appreciation of the impact of spot and futures markets on each other and their respective function in price discovery is the central idea of this study’s microstructure design. The volatility spillover and co-movement between the NIFTY spot and futures indices during the period of 2011–2021 are investigated. Maximal overlap discrete wavelet transformation (MODWT)-based DCC GARCH and Diebold and Yilmaz (2012) models have been applied to understand the dynamic associations and spillovers between returns of NIFTY spot and futures indices. To uncover the time-varying vibrant communications among the markets at diverse scales, a wavelet coherence technique has been used. The study found that index prices have a strong and significant dynamic conditional correlation at all scales, and there is diffusion of news in the short as well as long terms. The study uses novel granular wavelet-based research models to decode time–frequency varying behavioural patterns of spot and futures stock indices of India. It highlights the relationships between variables of interest over a range of timescales and allows market participants to rapidly evaluate their investment horizons at varied frequency band scales when building portfolio choices. Therefore, the study offers added understanding to investors and risk managers. JEL Classifications: G11, G12, G13, G14

Zhang W., He X., Hamori S.

This study analyzes the impact of the COVID-19 pandemic and the Russia-Ukraine war on the connectedness of lower-order moments (returns and volatility) and higher-order moments (skewness and kurtosis) in the markets of green bonds, clean energy, wind, solar, and sustainability indexes. To compare the spillover effects of these moments, we use the Diebold and Yilmaz and Barunik and Krehlik methods. Our findings show that the total spillover effect of lower-order moments is higher than that of higher-order moments in the time domain. In the frequency domain, the total return and skewness spillover are primarily concentrated in the short term, whereas the total volatility spillover is mainly concentrated in the long term. Furthermore, we observe that the spillover effect of the Russia-Ukraine war on the green finance market is mild, while the COVID-19 pandemic has a significant and unprecedented influence on the spillover of both lower- and higher-order moments in this market. Additionally, we note that before the COVID-19 outbreak, the total kurtosis spillover was irregular, but it became concentrated in the long term after the outbreak. Moreover, the continuation of COVID-19 has had an unprecedented and long-lasting impact on the kurtosis and skewness of the green bond market.

Foglia M., Palomba G., Tedeschi M.

Geopolitical risk pertains to the potential impact of political, economic, and social factors on the global or regional landscape, giving rise to potential disruptions in the prevailing background. This paper examines the dynamic impact of country-specific geopolitical risk indexes on the G8 countries and commodity market prices. Using a sample of monthly data ranging from January 2001 to October 2022, after estimating a time-varying parameter VAR model, we perform an impulse response analysis that accounts for the major political and economic events that have shaken the past two decades. Our main findings show that geopolitical risk transmission differs from country to country and often depends on geographical proximity, that geopolitical risk appears to affect the energy sector more than metals and food, and that the effects of shocks tend to be absorbed within a year. We also find the magnitude of geopolitical shocks in the US and Russia to be the most relevant, especially after the 2008 global crisis and the Russia–Ukraine conflict in 2022. Our results could provide useful information to financial policymakers and market regulators to face external shocks, thereby achieving greater macroeconomic stability.

Nwonye N.G., Onuselogu O.C., Anisiuba C.A., Ezeaku H.C., Egbo O.P.

This study analyses the effect of geopolitical tensions, oil prices, and carbon emission futures on green metal prices using the SVAR model. The study focuses on the Russia-Ukraine conflict and utilises a real-time daily dataset from December 1, 2021, to March 7, 2023. The findings show that geopolitical tensions and carbon emissions futures returns have a negative effect on green metal market returns, with oil price returns having a more significant negative impact than the observed temporary upticks. The study also identifies copper, nickel, silver, and zinc returns as negatively associated with geopolitical risk, while aluminium demonstrates a significant positive correlation after temporary downticks. The research further reveals that aluminium, copper, and zinc returns respond positively to carbon emissions futures, while nickel and silver returns correlate negatively. Additionally, oil price shocks negatively impact aluminium, copper, and zinc returns while exerting mixed influence on nickel and silver price returns, with more pronounced positive and negative shocks, respectively. The results have particular relevance in the context of the Russia-Ukraine War, with the positive response of carbon emissions futures to geopolitical risk potentially due to possible disruptions of policies aimed at reducing carbon emissions. The practical policy implications of the findings are discussed.

Gupta H., Gupta A.

Purpose The devastating acute COVID-19 epidemic crippled the global economy in 2020. Within a month of the COVID-19 epidemic, every industry saw its stock prices plummet the most. Ending the COVID-19 pandemic will need equitable access to safe and effective vaccinations. This study aims to look at the link between COVID-19 vaccination and the stock markets for health and pharmaceutical sector. Design/methodology/approach The researchers used a mean-adjusted return model and event research approach to figure out how the first dose of the COVID-19 vaccine affects health and pharmaceutical sector stock market returns. Findings The evidence-based outcome indicates that immunisation announcement affects health and pharmaceutical company returns. Furthermore, the study concludes that the health and pharmaceutical industry is inefficient for a short period of time, but after 41 days, the sector absorbs the noisy information. Originality/value Since the outbreak, the development of COVID-19 vaccines has been a key focus of shareholders and investors. This study is unique in that it investigates the effect of the first dosage of SARS-CoV-2 vaccination on equity returns in the health and pharmaceutical industries, and it is likely to make a substantial contribution to the capital market literature on event methodology.

Ali S., Ijaz M.S., Yousaf I.

Using a novel TVP-VAR approach, we investigate the connectedness between precious metals, industrial metals, and decentralized finance (DeFi) assets during pre-pandemic and Covid sub-periods. We also calculate optimal portfolio weights, hedge ratios, and hedging effectiveness estimates for the portfolios of metals and DeFi assets. Results reveal that the association between DeFi-precious metal and DeFi-industrial metal pairs is weaker compared to the association between traditional precious and industrial metals. The interconnectedness of these markets increased during the Covid-19 period. All DeFi assets, as well as palladium, aluminum, zinc, and Nickel, are net importers of return spillover, while gold, silver, platinum, and copper are net exporters of return spillovers. The return transmission between these markets is rolling, with rapid fluctuations during the Covid-19 period. Finally, the optimal portfolio analysis reveals that adding DeFi assets to the metals-based portfolio is helpful in terms of diversification. These findings are insightful for portfolio managers and policymakers regarding portfolio construction, portfolio adjustment, hedging, and market stability.

Si Mohammed K., Khalfaoui R., Doğan B., Sharma G.D., Mentel U.

The prime objective of this article is to examine the policy-making role of metal markets, gold resources, and clean energy markets in the post-COVID-19 era and the Russia-Ukrainian military conflict. In doing so, we analyze the role of fossil fuels, clean energy, and metals markets, considering the military conflict in Ukraine in 2022. The study employs event study methodology (ESM), Total connectedness index (TCI), and network analyses. The results indicate that natural gas and clean energy prices are less affected by conflict in the aftermath of an invasion than traditional energy and metals markets. In addition, we observe an increase in the TCI in the energy markets during announcement days. The TCI of the metals market is greater than that of the energy market. According to network connectivity, the key asset class transmitters of the shock in Europe are the Geopolitical index (GPR), gold, and the clean energy stock index (ERIX). The U.S. markets are less affected by the situation in Ukraine. The average hedge suggests that the optimal hedge differs from one market to the next, with fossil fuels and renewable energy, respectively, being more hedge effective and reducing risk by an average of around 0.80 and 0.59, given their ability to function as a hedging instrument.

Jonsson E., Törmänen T., Kløve Keiding J., Bjerkgård T., Eilu P., Pokki J., Gautneb H., Reginiussen H., Rosa D., Sadeghi M., Sandstad J.S., Stendal H.

Abstract Europe is mainly relying on imports of critical raw materials (CRM) for its industry, not least the vital ones for emerging green energy technologies. Among the main metal and mineral producers in Europe today, the Nordic countries (here: Greenland, Norway, Sweden and Finland) share a diverse geology with various deposit types formed over a long geological time span. This has led to large near-future potential with regards to CRM production. Based on current knowledge and datasets, we assess the Nordic geological potential for the CRMs which are specifically relevant for green technologies, namely: cobalt, graphite, hafnium, lithium, niobium, platinum-group metals, rare earth elements, silicon, tantalum, titanium, and vanadium, describing the most important deposits, their setting and characteristics. Several Nordic CRM resources stand out in a European and even global context, such as the giant REE(-Nb-Ta-Hf) deposits in Greenland, while the REE-Nb-(Hf) deposits at Fen (Norway) and Norra Kärr (Sweden) are very significant for Europe; Finland has the only major cobalt production, while Norway has very significant graphite and titanium resources and production. Furthermore, Sweden, Finland and Greenland have very large vanadium resources. Additionally, we conclude that the Nordic research and exploration potential for most CRMs is large.