Asymmetric dynamics between the Baltic Dry Index and financial markets during major global economic events

Abstract

This research investigates the asymmetric dependence of the Baltic Dry Index on conventional financial markets during major global economic events in the period 1995–2023 using the rolling window wavelet correlation (RWWC) and time-varying parameter vector autoregression (TVP-VAR). The results of the RWWC reveal a considerable relationship between these markets over short- to medium-term investment horizons, whereas the relationship dynamically switches between positive and negative in the long term. The TVP-VAR reveals that asymmetry occurs for upward and downward movement spillover results. The total connectedness index is higher for downward market condition spillover than for the upward market spillover.