COVID-19 impact on commodity futures volatilities

Yongmin Zhang and Ruizhi Wang

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: COVID-19 pandemic has affected almost all aspects of the global economy, especially commodity futures markets, due to the disruption risk of global supply chains from the pandemic lockdown. This paper extends ARMA-GARCH models to investigate the pandemic impact on both long-run and short-term volatilities of four major commodity futures. Model-fitting results reveal that the pandemic event has enhanced long-run volatilities for all futures returns, while the daily COVID-19 infection speed has mixed effects on short-term (instantaneous) volatilities. Our extended models and research findings are useful in global supply chain risk management, commodity options trading and regulators’ supervision of inflation risk.

Keywords: COVID-19 pandemic; Commodity futures volatilities; ARMA-GARCH models (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005614

DOI: 10.1016/j.frl.2021.102624

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