ABSTRACT
We utilize wavelet coherency methodology with simulated condence bounds to examine the short-term and long-term dependencies of the returns for S&P 500 and the S&P GSCI® commodity index. Our results indicate no evidence of comovement between S&P 500 total return and the S&P GSCI® commodity index total return in the short term, thereby suggesting diversication gains for equity investors. Importantly, this nding encompasses the onset of the current nancial crisis. However, long-term diversication benets, particularly aer the onset of the recent nancial crisis, are limited. We nd, moreover, no consistent evidence of comovements between S&P 500 and 10 individual sub-indexes of the S&P GSCI® commodity index. Of particular importance, we report weak comovement of returns between S&P 500 and S&P GSCI® Precious Metals total return and S&P 500 and S&P GSCI® Sos at all frequencies, implying signicant diversication gains both for short-term and long-term investors.
