The relationship between commodity and stock markets: A research on green financial indices

Commodities can be used in manufacturing and industry as raw materials in daily life, and some commodities such as silver, copper, etc. can also be used in renewable energy production. In addition, there is a relationship between the prices of fossil resources such as oil and natural gas and renewable energy production and investment. In this sense, it is very important to investigate the volatility spillover relationship between commodities, which are both commodities and used as investment instruments, and green financial indices. This paper examines the dynamic connectedness between gold, silver, selected to represent precious metals; crude oil, natural gas, selected to represent energy commodities; the S&P Global Clean Energy Index and the S&P Green Bond Index selected to represent green financial indices by analysing data for the period 04.01.2015-05.05.2023 using the Time Varying Parameter Vector Autoregression (TVP-VAR) model. The results of the analyses show that crude oil and the S&P Green Bond Index are volatility transmitters while gold, silver and the S&P Global Clean Energy Index are volatility receivers. It can be said that a movement in the price of crude oil has an impact on the price formation of the S&P Global Clean Energy Index and the S&P Green Bond Index. It is also observed that there is a volatility spillover from the S&P Global Clean Energy Index and the S&P Green Bond Index to gold and silver. In addition, it can be said that the dynamic connectedness between commodities and the S&P Global Clean Energy Index and the S&P Green Bond Index increases during periods of uncertainty and instability, and that these variables should not be included together in portfolios during such periods, whereas these assets can be used together in portfolios during periods of reduced uncertainty. Keywords: Commodity markets, Green Financial Indices, Dynamic Connectedness, TVP-VAR Analysis