The impact of geopolitical risks on connectedness among natural resource commodities: A quantile vector autoregressive approach

Abstract

This study examines the impact of global geopolitical risk on connectedness among major natural resource commodities. We implemented a Quantile Vector Autoregressive connectedness estimation approach from 5 January 2010 to 3 March 2023 including many geopolitical turbulences such as the Russian-Ukrainian war. We found high connectedness under both extraordinarily high and low return conditions. The extreme return shocks in metals tended to spillover to energy commodities. The spillover index peaked during important economic political and financial developments. In addition geopolitical risk drives connectedness among natural resources commodities under average market conditions. Our results may help investors with portfolio optimization and risk management practices and guide policymakers toward attaining financial market stability. © 2023 Elsevier B.V. All rights reserved.