Unveiling Dynamic Correlations and Strategic Portfolio Insights: A Comparative Study of Commodities and Stock Markets in Arab and European Regions
DOI:
https://doi.org/10.15173/esr.v28i1.6861Abstract
Understanding time-varying correlations between commodities and stock markets is key for risk management and diversification. This paper examines dynamic linkages of wheat, copper, oil, and gold with European and Arab equities using daily data (2016–2023) and a VAR-DCC-GARCH framework, incorporating events like COVID-19 and the Russia–Ukraine war. Results reveal significant shifts in conditional correlations during crises, underscoring the need for adaptive policies to address volatility. Commodities improve diversification more in European than Arab markets, with copper providing the strongest hedge. These findings offer important insights for portfolio strategy and policy in regional financial markets.
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