Realized Volatility Spillovers between Energy and Metal Markets: A Time-Varying Connectedness Approach

This paper analyzes the degree of dynamic connectedness between energy and metal commodity prices in the pre and post COVID-19 era, using the TVP-VAR based connectedness approach of Antonakakis et al. (2020). The results suggest that market interconnectedness slightly increased following the outbreak of COVID-19, although this increase was lower and less persistent than that observed after the Global Financial Crisis of 2008. Furthermore, we find that crude oil was the main transmitter of shocks during the period prior to COVID-19 while heating oil, gold and silver became the main transmitters of shocks during the COVID-19 pandemic. On the contrary, natural gas and palladium have been the main receivers of shocks during the whole sample period, making these two commodities attractive hedging and safe-haven options for investors during the pandemic crisis. The implications of our findings for portfolio diversification and energy transition policies are discussed.