Title: Portfolio diversification opportunities in Indian stock and commodity markets using TVP VAR extended joint connectedness approach

Authors: Ishwar Sharma; Meera Bamba; Bhawana Verma; Bharti Verma

Addresses: Department of Commerce, Indira Gandhi University, Meerpur-Rewari, Haryana, India ' Department of Commerce, Indira Gandhi University, Meerpur-Rewari, Haryana, India ' Department of Commerce, Indira Gandhi University, Meerpur-Rewari, Haryana, India ' Department of Commerce, Indira Gandhi University, Meerpur-Rewari, Haryana, India

Abstract: The study investigates the connectedness in stock and commodity markets of India and its implication for portfolio diversification using the TVP-VAR extended joint connectedness approach. According to the study's findings, there is low spillover between the stock and commodity markets, suggesting that diversification benefits can be taken by building a stock-commodity portfolio. The study discovers a time-varying relationship between stocks and the commodity market. Total connectedness was high during covid and the Russia-Ukraine war, but the connectedness during the Russia-Ukraine war was lower than during covid. Most of the time, however, all commodities are negatively connected with stocks. Still, because the magnitude of the negative connectedness of gold and crude oil with stock is substantial, it can be concluded that a portfolio of stocks with gold and crude oil may provide better diversification benefits than other commodities. This research provides valuable information for portfolio managers, investors, financial advisors, policymakers and regulators.

Keywords: stock market; commodity market; time-varying parameters vector autoregression; TVP VAR extended joint connectedness approach; portfolio diversification; Nifty; MCX.

DOI: 10.1504/AAJFA.2026.150617

Afro-Asian Journal of Finance and Accounting, 2026 Vol.16 No.1, pp.80 - 101

Received: 28 Jul 2023
Accepted: 04 Mar 2024
Published online: 18 Dec 2025 *

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