The determinants of extreme commodity prices

Karlygash Kurlbayeva and Samuel Malone
Authors registered in the RePEc Author Service: Karlygash Kuralbayeva

No 96, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: Fat-tailed commodity price innovations are well-documented in the literature and long recognized as disruptive for consumers and producers, yet little is known about what factors drive such extreme events. Utilizing a wide range of factors from the economics and finance literature and quantile regression techniques, we shed light on this issue. Our models explain more variation in extreme than in median price innovations. Common global financial and demand factors account for a greater proportion of extreme daily spot price variations than do commodity-specific factors such as basis and open interest. Financialization of commodity markets, via significant and increasing co-variation of extreme spot price innovations with US equity market and trade-weighted US dollar returns, appears to be a major driver of extreme events in the 2000-2009 period.

Keywords: commodities price returns; extreme dependence; quantile regressions (search for similar items in EconPapers)
JEL-codes: E31 G13 G15 (search for similar items in EconPapers)
Date: 2012-09-12
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:096

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