Investigating the impact of geopolitical risks on the commodity futures
Investigating the impact of geopolitical risks on the commodity futures
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Date
2022-03-20
Authors
Sokratis Mitsas
Petros Golitsis
Khurshid Khudoykulov
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Publisher
Taylor and Francis
Abstract
This paper examines the effect of real-time global geopolitical risks (GPRs), acts (GPAs), and threats (GPTs) indices on monthly returns and volatility of several American commodity futures. By modeling volatility via an Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH), we provide evidence that GPRs and GPTs do not only impact but trigger adverse effects on the returns of crude oil, gold, platinum, and silver, while GPAs negatively affect the returns of crude oil, heating oil, platinum, and sugar futures. Furthermore, GPTs have a weak positive effect on corn futures volatility. Overall, our findings provide portfolio diversification benefits by showing how the impact of global GPRs, GPAs and GPTs on portfolio returns could be mitigated.
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Citation
Mitsas, S., Golitsis, P., & Khudoykulov, K. (2022). Investigating the impact of geopolitical risks on the commodity futures, Cogent Economics & Finance, 10(1).