International Journal of Business and Economics Volume 24, No. 2 September, 2025

Linkages Between Equity and Commodity Markets: An Empirical Evidence

Sethy Tapas Kumar

Indian Institute of Management Shillong, Meghalaya, India

Tripathy Naliniprava

Indian Institute of Management Shillong, Meghalaya, India

Abstract

The present study explores the long-run and short-run association among equity, Agro-commodity (NCDEX) gold, silver, crude oil market in India using the Auto-Regressive Distributed Lag (ARDL) and Generalized Method of Moment (GMM) model. Further, Fully Modified Ordinary Least Square (FMOLS)model is employed to determine the sensitivity and robustness of the estimation of ARDL Bounds test approach. Our paper examines the dynamic response of Agro-commodity during periods of financial turmoil, high economic policy uncertainty, and high inflation. Our findings indicate that Agro-commodity is negative and significantly correlated with equity, gold, and crude oil, and in contrast, it has a positive and significant correlation with silver, EPUI, and the inflation rate. Further the results of our study signify the cointegration amid the variables in which Agro-commodity converges to its long-run equilibrium level by 3.809% speed of daily adjustment by the contribution of other independent variables. The positive and significant correlation with control variables like inflation and Economic Policy Uncertainty Index (EPUI) indicates that the diversification benefits can be maximized by including Agro-commodity in asset portfolios as a risk-hedging instrument and safe haven during the period of financial distress, high economic policy uncertainty, and high inflation. Our findings are robust and would benefit policymakers and regulators and help investors, portfolio managers for developing trading strategy before investment decisions.

Keywords：Equity market, Commodity market, ARDL model, GMM model, FMOLS model

JEL Classifications：G1, C23, C58

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