Uncovering the complex asymmetric relationship between trading activity and commodity futures price: Evidenced from QNARDL study

Sangram Keshari Jena, Amine Lahiani, Aviral Tiwari and David Roubaud

Resources Policy, 2021, vol. 74, issue C

Abstract: This study cracks the multidimensional asymmetric relationship between trading activity (volume and open interest) and commodity futures prices to analyze the short-term dynamics and long-term cointegrating relationship across different state of the market considering both positive and negative changes in trading activity using a novel Quantile Non-linear Autoregressive Distributed Lag (QNARDL) approach. First, the asymmetric price effect is found in short- and long-run of volume and open interest. Second, the asymmetric price effect due to positive and negative changes in open interest (volume) is found in the short-run (long-run) for copper (gold and crude) futures. Third, distributional asymmetry is found in the above two price effects on all three commodity futures implying that the price effect changes with changes in market conditions such bearish, bullish, and normal. Our findings will help the portfolio managers for effective investment and diversification decision, traders for better trading strategy, hedgers for better risk management strategy, and regulators and concerned exchange for effective policy making in varied market conditions.

Keywords: Commodity futures; Gold; Crude; Copper; Volume and open interest; Quantile ARDL and NARDL (search for similar items in EconPapers)
JEL-codes: C52 Q42 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Uncovering the complex asymmetric relationship between trading activity and commodity futures price: Evidenced from QNARDL study (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:74:y:2021:i:c:s0301420721002889

DOI: 10.1016/j.resourpol.2021.102277

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