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The asymmetric return-volatility relationship of commodity prices

Dirk G. Baur and Thomas Dimpfl ()

Energy Economics, 2018, vol. 76, issue C, 378-387

Abstract: There is a well documented asymmetric return-volatility effect of equity returns, that is, negative shocks increase volatility by more than positive shocks. This paper analyzes the return-volatility relationship of commodity prices and finds a positive (inverted) asymmetric effect with a tendency to weaken and converge towards an equity-like effect since the mid 2000s and particularly during the global financial crisis. A comparison of the findings with equity prices also reveals a strengthening of the asymmetric effect in equity markets. The change in the asymmetric volatility effect is consistent with the financialization of commodity markets and has strong portfolio implications.

Keywords: Asymmetric volatility; Commodity markets; Financialization (search for similar items in EconPapers)
JEL-codes: G14 Q02 Q14 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.eneco.2018.10.022

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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