Investigating the role of metal and commodity classes in overcoming resource destabilization

Abstract

The resource destabilization and accentuated demands for sustainability across the globe have motivated the current study to examine the nexus between the classes of metals and commodities to highlight the role of various metals in reducing the carbon footprint. We employed two alternative perspectives of time and frequency connectedness between metal classes including energy metals, precious metals, and industrial metals and commodities like energy and agriculture for the period encompassing June 1, 2012 to February 11, 2022. We found that spillovers are fashioned in the similar class than across the metal classes and commodities. Energy metals are strongly disconnected revealing their diversification benefit while other metals and commodities form intra-class spillovers. The time-varying spillovers emphasized on the distressed periods with spiked spillovers and net time-varying spillovers demonstrated leading risk contribution of crude oil and fuel. Our sub-sample analysis also detected the stronger inter-class connectedness in the post-COVID time. The findings inform policymakers, environmentalists, investors seeking sustainable portfolios, and asset managers.

Keywords: Commodity-classes, Frequency spillovers, Metal-classes, Time-connectedness, Resource utilization