Financial contagion of commodity markets from energy markets during the pandemic, energy crisis and SMO

The financialization of commodity markets leads to their integration with global financial markets and increasing inclusion in chains of transmission of systemic risk in the economy. Financial contagion is an atypical increase in the interdependence of financial markets under the influence of external shocks. The subject of this study is the financial contagion of global commodity markets (soft and agricultural goods) from the global energy market (oil and gas) during the pandemic, energy crisis and special military operation of Russia in Ukraine (SMO). The purpose of the study is to establish the facts of financial contagion, its dynamics and intensity for different groups of goods. The construction of the author's stress indices allows us to distinguish between periods of a calm market and increased market volatility. Testing for contagion is carried out using the construction of ARDL-GARCH models, dynamic method of co-moments of the returns distribution of the source market of contagion and the recipient market, including the calculation of conditional correlation, coskewness, cokurtosis and covolatility. A conclusion about possible contagion is made based on a comparison of test statistics with a critical value for a normal or asymptotically normal distribution. The study confirmed contagion of exchange-traded futures markets by oil and natural gas futures markets in all periods. Oil market showed greater contagiousness compared to the gas market; oil proved to be relatively uniformly contagious in different periods, while gas proved to be relatively more contagious during the SMO. Agricultural commodities have proven to be more susceptible to contagion from energy markets than soft commodities. Stronger market contagion occurs at higher co-moments of distribution (volatility contagion, return-volatility and return-asymmetry contagion) than at lower co-moments of distribution. The results obtained can be useful for investors in developing optimal hedging strategies and managing investment portfolios, and for the state in improving financial stabilization policies during periods of crisis.

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