Does the stock market drive herd behavior in commodity futures markets?

Riza Demirer, Hsiang-Tai Lee and Donald Lien

International Review of Financial Analysis, 2015, vol. 39, issue C, 32-44

Abstract: This paper contributes to the debate on commodity financialization by extending tests of herd behavior to commodity futures markets. Utilizing a regime-switching model, we test the presence of herd behavior in a number of commodity sectors including energy, metals, grains and livestock during the low and high market volatility states. We find significant evidence of herd behavior in grains only during the high volatility state. We also find that large price movements in the energy and metal sectors significantly contribute to herd behavior in the market for grains. Finally, we find no significant effect of the stock market on herd behavior in the commodity futures market. Our findings in general do not support the much debated commodity financialization hypothesis.

Keywords: Herd behavior; Commodity financialization; Return dispersion; Markov switching (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:39:y:2015:i:c:p:32-44

DOI: 10.1016/j.irfa.2015.02.006

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