Financialization, idiosyncratic information and commodity co-movements

Yan-Ran Ma, Qiang Ji, Fei Wu and Jiaofeng Pan

Energy Economics, 2021, vol. 94, issue C

Abstract: This paper seeks to explore the factors contributing to the return co-movement dynamics in the international commodity markets. We first adopt a minimum spanning tree (MST) characterized by a DCC-GARCH specification to depict the return co-movement among 21 commodities selected from the energy, agricultural and metal commodity markets. A connectedness network is then constructed to examine the contributions of both fundamentals and non-fundamental factors to the level of commodity return co-movement. The empirical results show that linkages across energy commodities are substantially stronger than among agricultural or metal commodities. Non-fundamental factors such as commodity market financialization and market sentiment play important roles in driving return co-movement over the sample period, though their impacts vary over time.

Keywords: Co-movement; Commodities; Market sentiment; Financialization; Idiosyncratic information (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:94:y:2021:i:c:s0140988320304230

DOI: 10.1016/j.eneco.2020.105083

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