Common Drivers of Commodity Futures?

Tom Dudda, Tony Klein, Duc Khuong Nguyen and Thomas Walther

Working Papers from Utrecht School of Economics

Abstract: We study potential drivers for a large cross-section of commodity futures. Unlike previous studies, we examine the effect of monthly drivers on daily returns using mixed- frequency Granger causality tests. We find real economic activity as a main driver on a monthly basis, whereas financial variables seem to affect returns at daily frequency. The linkages are time-varying for various stages of the financialization of commodity markets with an overall dissipating impact in the recent period of de-financialization. As our results strongly differ from traditional low-frequency Granger causality tests under the temporal aggregation of futures returns, we show the economic value of accessing infor- mation at a higher frequency in an out-of-sample trading study. Our findings emphasize the importance of using mixed-frequency techniques to uncover relationships between monthly-published macroeconomic variables and commodity prices.

Keywords: Commodity futures; VAR; Granger causality; Mixed data sampling (search for similar items in EconPapers)
Pages: 60 pages
Date: 2022
New Economics Papers: this item is included in nep-ets
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Working Paper: Common Drivers of Commodity Futures? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:use:tkiwps:2207

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