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

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.