In this article, we pursue to determine which mining firms have seen their stock returns become more sensitive to fluctuations in energy prices, over a time period predominated by the political turmoil caused by 9/11 and the subsequent invasion of Iraq. By resorting to wavelets and spatial statistics, we characterize the behavior of volatility and the degree of co-movement of the stock returns of ten leading mining firms operating in the Asia-Pacific region: Alcan Inc., Antofagasta, Barrick Gold Corp., BHP Billiton, International Nickel Ind., Peabody Energy, Phelps Dodge Corp, Rio Tinto plc., Teca Cominco Ltd., and Yanzhou Coal Mining Co.Our findings can be summarized as follows. Firstly, most mining company returns became especially volatile around the time of the declaration of war on terror and the subsequent invasion of Iraq, and around the time of the sizeable hike in the oil price during 2005-2006. Interestingly, firms which belong to a particular industry did not necessarily display identical patterns of return volatility. Secondly, the metals and minerals analyzed exhibited different degrees of dependency on energy prices. The maximum correlation was observed for aluminum and the minimum for Nickel. Gold and copper tended to be more energy dependent at the upper scales of the data (i.e., trend component). As to spatial dependency, there is evidence of it over the first quarter of 2003, the first three quarters of 2004, and towards the second and third quarters of 2006.JEL: C5, G1.
Keywords: Iraq war, spatial correlation., volatility shifts, wavelets