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Abstract(s)
This study investigates the co-movements between the Solactive Electric Vehicle and Future
Mobility Index (EVFMI) and multiple rare earth elements (REEs). We applied a TVP-VAR model
and bivariate wavelet coherence approach to capture co-movements both in the time and frequency
domain considering short-, medium- and long-term investment horizons. Using daily returns from
1 June 2012 to 4 June 2021, the results of the TVP-VAR model show that individual REEs and the
EVFMI have strong return connectedness and are heterogenous over time. The bivariate wavelet
coherence approach reveals that Dysprosium, Neodymium, Praseodymium and Terbium returns have
positive co-movement (in-phase) with the EVFMI in the medium-term and long-term. In contrast,
Cerium, Europium, Lanthanum and Yttrium returns have negative co-movements (out-phase) with
the EVFMI in the medium-term and long-term. We find strong positive co-movements between
the MVIS Global Rare Earth/Strategic Metals Index (MVREMX) and EVFMI at multiple wavelet
scales. Following the lead/lag relationship, Cerium, Europium and Lanthanum, Yttrium returns are
leading the EVFMI, and Neodymium, Dysprosium, Praseodymium, Terbium and MVREMX returns
are lagging to the EVFMI. This study, therefore, suggests heterogenous hedging and diversification
properties of REEs over time and investment horizons. Specifically, Cerium, Europium, Lanthanum
and Yttrium act as strong hedges in long-term investment horizons and Neodymium, Dysprosium,
Praseodymium and Terbium are weak hedges or diversifiers in short-term investment horizons.
These results may be of particular interest to investors and relevant to policymakers considering
multiple investment horizons.
Description
Keywords
electric vehicles future mobility rare earths hedge diversifier TVP-VAR wavelet coherence
Citation
Publisher
MDPI