Oil, Gold and International Stock Markets: Extreme Spillovers, Connectedness and its Determinants

This study examines the lower and upper return spillovers and connectedness between important commodity (crude oil and gold) and main international stock markets using the quantile connectedness approach by Ando et al. (2018). The results show stronger return spillovers during bearish and bullish market conditions. Crude oil and gold are net receivers of return spillovers irrespective of quantiles. Furthermore, an intense spillover is observed during high stress periods including COVID-19 in March 2020, and global economic slowdown and the Brexit referendum of 2016, oil price crash in 2014-2016, Tapering Tantrum in 2013, and the subprime crisis of 2008. Moreover, the spillovers in lower quantiles are stronger than in upper quantiles. The volatility uncertainty index (VIX) has a negative impact on the connectedness index at low and median quantiles. Gold and economic policy uncertainty indexes have a positive impact on lower quantile spillovers. In contrast, oil uncertainty index has a negative impact on quantile spillovers. COVID-19 crisis has a positive impact on lower, medium, and upper spillovers.