Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295978 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 10889
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We analyze (frequency) connectedness and portfolio hedging among U.S. energy commodities from 1997 to 2023. We show that the total connectedness increased over time, likely due to the increasing financialization of energy commodities. It fluctuates with respect to (i) different investment horizons and (ii) different periods of distress. The early stage of the Russia-Ukraine war is associated with the highest systemic risk, followed by the Covid-19 pandemic and global financial crisis (GFC). In the frequency domain, the results imply that investors perceive the greatest risk at longer investment horizons, particularly during the three major distress periods. We also show that despite it is difficult and more costly to diversify an energy portfolio during distress periods, adding natural gas seems to bring non-marginal diversification benefits.
Subjects: 
connectedness
volatility spillovers
frequency decomposition
portfolio weights and hedge ratios
energy commodities
distress
JEL: 
C58
F65
G15
Q34
Q41
Document Type: 
Working Paper
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