رابطه میان انرژی و بازارهای سرمایه : شواهدی از توابع پاسخ ضربه نوسانات

This paper examines the relationship between the energy and equity markets by estimating volatility impulse response functions from a multivariate BEKK model of the Goldman Sach’s Energy index and the S&P 500; in addition, we also calculate the time varying conditional correlations and time varying dynamic hedge ratios. From volatility impulse response functions, we find that low S&P 500 returns cause substantial increases in the volatility of the energy index; however, we find only a weak response from S&P 500 volatility to energy price shocks. Moreover, our dynamic hedge ratio anlysis suggests that the energy index is generally a poor hedging instrument.

Commodity markets are highly liquid and have a substantial proportion of investors who view commodities purely as Investments (financial assets/securities) rather than as a means to support “real” economic activity via hedging and risk management (Vivian and Wohar, 2012). The motivation behind including commodities in an investment portfolio is captured well by the promotional material listed on the website of PIMCO Commodity Real Return Strategy Fund, “Because commodities are “real” assets like oil, metal or grain, they are sensitive to different economic factors and tend to perform differently, as evidenced by their low or negative correlation (tendency to move in tandem) with stocks and bonds. Adding commodities to a balanced portfolio may enhance overall diversification. Of course, diversification does not guarantee a profit or protect against loss. 1” As noted in Stoll and Whaley (2010), inclusion of commodities or commodity exchange traded funds as diversifying assets in traditional portfolios has become much more common since 1998. This increase in speculative market players who view commodities purely as an investment asset has been termed the “financialization” of commodities and is a departure from the traditional environment which primarily involved producers and consumers of the commodity. Given this “financialization” of commodities, there is currently a debate over the role of speculative traders in commodity markets and whether they contribute to the rise of commodity prices since 2000. This position has been echoed by Michael Masters, George Soros, and more recently by former Congressman Joe Kennedy in a New York Times OpEd piece.2Soros (2008) stated, “You have a generalized commodity bubble due to commodities having become an asset class that institutions use.” In fact, the role of speculators in commodity markets was one of the most controversial aspects of the 2010 Dodd-Frank legislation; the legislation authorized the Commodity Futures Trading Commission (CTFC) the ability to limit trading in over-the-counter swaps. The CFTC used their new authority and voted on October 18th 2011 to limit positions in 28 physical commodity futures or financial equivalents.3 It should be noted that the “financialization” of commodities is pointed to as a partial explanation for the rise in correlations between commodities and equities during the financial crisis. However, this increase in correlations could also be partly due to global economic conditions impacting both the equity market and commodity market. While it is not the objective of the paper to provide formal evidence on this point, we do examine the impact of changing correlations for diversification and hedging. This paper importantly extends prior literature by examining volatility impulse responses to equity return shocks and to energy return shocks. There is growing evidence that equity and commodity markets are inter-connected and that the correlations between commodities and equities has increased since the early 2000s (see for example Creti et al., 2013, Gilbert, 2010 and Silvennoinen and Thorp, 2013). This evidence is cited to support the assertion that speculators have had a significant effect on commodity prices since the early 2000s, although whether speculators have had a material impact on the properties of commodity time series is disputed (Hamilton and Wu, 2012, Valiante, 2011 and Vivian and Wohar, 2012). In fact, the correlation between energy commodities and equities may not be driven by the “financialization” of commodities but rather may reflect other factors. For example, it is plausible global economic conditions play a major role. The deterioration in global economic conditions could have been an important contributing factor to the spike in correlations between the stock market and energy prices during 2008–9 when stock market falls accompanied energy price falls. Regardless of the reason, if the correlation between traditional asset classes and commodities has increased, then the usefulness of commodities as a diversification tool (as suggested in the above PIMCO material) has become much more limited.4 However, much prior literature appears to have overlooked the fact that increased correlations will actually make commodities a better hedge for equity (provided the absolute value of the correlation coefficient increases). Given that hedging typically involves taking a long position in one asset (here equity) and a short position in another asset (here a commodity), the rise in correlations suggests that a move in equity price will be better offset by a short position in the commodity; thus, the hedge has become more effective. Nevertheless, the relationship between commodities and equities is certainly a pertinent question that attracts attention from policymakers, producers, academics, investors, the media and consumers. Creti et al. (2013) note that “volatility of commodity prices is thus a central issue for the world economy, as notably illustrated by the G20 which addressed the question of excessive fluctuations and volatility of commodity prices in its September 2009 Pittsburgh summit” (p16). This begs the questions of i) How quickly does a volatility shock dissipate and ii) What is the response of commodity volatility to a shock to equity volatility (or vice-versa)? To our knowledge these questions have not yet been examined using volatility impulse response functions in the equity-energy market context. An important contribution of this paper is to fill this gap in the literature. We meet this objective by estimating volatility impulse response functions from a multivariate BEKK model of the Goldman Sach’s Energy index and the S&P 500; in addition, we also calculate the time varying conditional correlations and time varying dynamic hedge ratios. We focus on the Energy index since it is a widely used benchmark for investment performance in the energy commodity market5; it is consequently a useful overall barometer for the energy market. To generate the volatility impulse response functions, we employ the methodology outlined in Hafner and Herwartz (2006). One benefit of their methodological approach is that it allows one to pick “shocks” from a specific time period. As such, we utilize this feature to examine how the variance of each of variable (energy index, S&P 500 index) respond to “low”, “median”, and “high” shocks. Put another way, we are able to show how the variance of the S&P 500 (energy index) responds to small and large price shocks in the energy (S&P 500) sector. To preview our results, first, we find that low S&P 500 returns cause substantial increases in the volatility of the energy index; however, we do not find any substantial effects on the volatility of the S&P 500 that result from large positive energy price returns. Secondly, we find that the conditional correlation increased substantially during the financial crisis (2008–2010) but was approximately zero beforehand; this is broadly consistent with Creti et al.’s (2013) finding for Oil and S&P500 using an alternative modelling approach. Thirdly, the analysis of dynamic hedge ratios suggests that the energy index is a poor hedging instrument for equity movements, apart from during the financial crisis (2008–2010). Consequently our evidence suggests that the impact of financial crisis had a differing impact depending upon whether the market participant was looking to diversify an investment portfolio or hedge an equity position. For a speculative investor attempting to achieve diversification benefits by using the energy index during the crisis will have found these were much smaller when they were needed most; in contrast the usefulness of the energy index to hedge equity movements greatly increased during the financial crisis. The remainder of this paper is organized as follows. Section 2 summarizes recent literature. Section 3 discusses our data and methodology. Section 4 presents our model results and evaluates the time-varying conditional correlations and time varying hedge ratios. Section 5 concludes.

This paper uses volatility impulse response functions, conditional correlations, and dynamic hedge ratios to examine the relationship between the energy sector and the S&P 500. Our volatility impulse response functions suggest that the volatility of energy is much more sensitive to low S&P 500 returns. In addition, it appears that the conditional variance of energy is particularly sensitive to low S&P 500 returns/news. This could reflect that the equity market is an earlier indicator of economic risk than the energy market (Soucek and Todorova, 2013 p597); in particular the S&P 500 should drop dramatically (have a low return shock) when high economic uncertainty is anticipated. Our finding that energy volatility is sensitive to equity return shocks is of considerable interest given that much prior literature emphasizes spillovers in the other direction from energy market to equity market (see for example Agren, 2006, Arouri et al., 2012 and Malik and Hammoudeh, 2007). In this paper we examine both time-varying conditional correlations and time-varying hedge ratios. Our results do not support the notion that the increased correlation between the energy and S&P 500 was the result of speculation; conditional correlations are not substantially different during the periods in which the “financialization” of energy commodities occurred. However, during the financial crisis period both the conditional correlation and hedge ratios increased markedly. While both these measures are closely connected their implications depend upon the type of commodity market participant considered. For a speculative investor pursuing a diversification strategy by investing in the energy index, the increased correlation will have shrunk the benefit from diversification when they were most needed. In contrast for a hedger, the increased hedge ratio (and increased correlation) indicates that the short position in the energy index is better able to offset movements from a long position in equity market. However except for the financial crisis period, equity-energy correlations were typically low but with substantial variability; this casts doubt upon the general use of energy as a good hedging instrument for the S&P 500.