Increasing Trends in the Excess Comovement of Commodity Prices

Kazuhiko Ohashi and Tatsuyoshi Okimoto

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We investigate how the excess comovement of commodity prices, that is, the correlation in commodity returns after filtering out common fundamental shocks, has changed over the past three decades by developing the smooth-transition dynamic conditional correlation model that can capture long-run trends and short-run dynamics of correlation simultaneously. Using data from 1983 to 2011, we find that significant increasing longrun trends in excess comovement have appeared since around 2000. We confirm that these increasing trends are neither an artifact of the financial crisis after the bankruptcy of Lehman Brothers in September 2008 nor the time-varying sensitivities of commodity returns to common fundamental shocks. Moreover, we find that no significant increasing trends exist in the excess comovement among off-index commodities and that the surge of global demand alone cannot explain the increasing trends. These findings provide additional evidence for the timing and scope of the recent increasing commodity-return correlations that suggest the influence of the financialization of commodity markets starting around 2000.

Keywords: excess comovement; commodity return; time-varying correlation; smooth transition; regime change; financialization (search for similar items in EconPapers)
JEL-codes: C32 C51 G15 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-02
New Economics Papers: this item is included in nep-agr and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... 6_ohashi_okimoto.pdf (application/pdf)

Related works:
Journal Article: Increasing trends in the excess comovement of commodity prices (2016)
Working Paper: Increasing Trends in the Excess Comovement of Commodity Prices (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2016-09

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().