Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market
Investment in commodity markets in India accelerated after 2007; this was accompanied by large price variability, hence, it becomes imperative to measure commodity price risk precisely. It becomes equally important to study the relationship between commodity price variability and the stock market. H...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2022-07-01
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| Series: | Investment Management & Financial Innovations |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16746/IMFI_2022_03_Agnihotri.pdf |
| _version_ | 1818159439984721920 |
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| author | Shalini Agnihotri Kanishk Chauhan |
| author_facet | Shalini Agnihotri Kanishk Chauhan |
| author_sort | Shalini Agnihotri |
| collection | DOAJ |
| description | Investment in commodity markets in India accelerated after 2007; this was accompanied by large price variability, hence, it becomes imperative to measure commodity price risk precisely. It becomes equally important to study the relationship between commodity price variability and the stock market. Hence, this study aims to calculate the tail risk of highly traded Indian commodity futures returns using the conditional EVT-VaR method for risk measurement. Secondly, the linkage between commodity markets and the stock market is also studied using the Delta CoVaR method. Results highlight the following points. There is risk transfer from the extreme increase/decrease in crude oil futures returns to the Nifty Index returns. Both extreme price increase or decrease of crude oil futures driven either by financial or a combination of financial and economic shocks affect the stock market. Zinc and Natural gas futures are not linked to the stock market, which means they can be useful in portfolio diversification. The findings suggest that, in Indian commodity markets, EVT-VaR is a useful tool for measuring risk. Only Crude oil futures shocks affect the stock market, and extreme integration between them becomes more prominent when oil shocks are driven by financial factors. Commodities other than Crude oil are not integrated with stock markets in India. |
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| format | Article |
| id | doaj.art-db1c2a2432754ac1ae49a27c2911e623 |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2024-12-11T15:46:01Z |
| publishDate | 2022-07-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-db1c2a2432754ac1ae49a27c2911e6232022-12-22T00:59:41ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582022-07-0119311210.21511/imfi.19(3).2022.0116746Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock marketShalini Agnihotri0https://orcid.org/0000-0001-9039-2105Kanishk Chauhan1https://orcid.org/0000-0002-7880-1743Assistant Professor, Management Faculty, Finance Department, Indian Institute of Management, Vishakhapatnam, Andra PradeshStudent, IIT Kanpur, Uttar PradeshInvestment in commodity markets in India accelerated after 2007; this was accompanied by large price variability, hence, it becomes imperative to measure commodity price risk precisely. It becomes equally important to study the relationship between commodity price variability and the stock market. Hence, this study aims to calculate the tail risk of highly traded Indian commodity futures returns using the conditional EVT-VaR method for risk measurement. Secondly, the linkage between commodity markets and the stock market is also studied using the Delta CoVaR method. Results highlight the following points. There is risk transfer from the extreme increase/decrease in crude oil futures returns to the Nifty Index returns. Both extreme price increase or decrease of crude oil futures driven either by financial or a combination of financial and economic shocks affect the stock market. Zinc and Natural gas futures are not linked to the stock market, which means they can be useful in portfolio diversification. The findings suggest that, in Indian commodity markets, EVT-VaR is a useful tool for measuring risk. Only Crude oil futures shocks affect the stock market, and extreme integration between them becomes more prominent when oil shocks are driven by financial factors. Commodities other than Crude oil are not integrated with stock markets in India.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16746/IMFI_2022_03_Agnihotri.pdfDelta Co-VaRfinancialization of the commodity marketIndiaportfolio diversificationquantile regressionsystemic risk |
| spellingShingle | Shalini Agnihotri Kanishk Chauhan Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market Investment Management & Financial Innovations Delta Co-VaR financialization of the commodity market India portfolio diversification quantile regression systemic risk |
| title | Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market |
| title_full | Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market |
| title_fullStr | Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market |
| title_full_unstemmed | Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market |
| title_short | Modeling tail risk in Indian commodity markets using conditional EVT-VaR and their relation to the stock market |
| title_sort | modeling tail risk in indian commodity markets using conditional evt var and their relation to the stock market |
| topic | Delta Co-VaR financialization of the commodity market India portfolio diversification quantile regression systemic risk |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16746/IMFI_2022_03_Agnihotri.pdf |
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