Time–Frequency Dynamics of Return and Volatility Spillovers between Global Financial and Commodity Markets

Abstract

This study investigates the spillover effects of returns and volatility across major financial and commodity markets over the period spanning the global financial crisis to the Russia–Ukraine war. Using the Diebold-Yilmaz connectedness framework and the Baruník-Křehlík frequency-domain approach, we decompose total spillovers into short-, intermediate-, and long-term horizons to explore how market interconnectedness evolves over time and under different crises. The results show that extreme global events sharply intensify both return and volatility spillovers, particularly in the short term, while long-term connectedness also increases during systemic crises. The developed equity (DE) market consistently acts as the dominant transmitter of shocks, whereas the frontier equity market, which is historically regarded as isolated, emerges as a key transmitter of volatility during the COVID-19 pandemic, reflecting growing global capital exposure. Bond and gold markets exhibit heightened interdependence with the DE market during crises, amplifying volatility under widespread shocks, while metals generally function as spillover receivers. Frequency decomposition further reveals that intermediate-term investors may achieve greater diversification benefits, as spillover intensity tends to diminish over longer horizons. These findings underscore how globalization and financial integration have deepened cross-market linkages, thereby reducing diversification opportunities during global shocks. This study offers practical implications for international investors optimizing portfolio strategies, for export–import firms managing exposure to concurrent financial and commodity shocks, and for policymakers designing macroprudential measures to mitigate systemic contagion risks.