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Analyzing herding behavior in commodities markets – an empirical approach

Gerson de Souza Raimundo Júnior, Rafael Baptista Palazzi, Marcelo Cabus Klotzle and Antonio Carlos Figueiredo Pinto

Finance Research Letters, 2020, vol. 35, issue C

Abstract: This study examines beta herding in the commodities market, using the methodology developed by Hwang and Salmon (2004) and a standardized beta adaptation by Hwang, Rubesam, and Salmon (2018) for a state-space model. We analyze the behavior of fifteen commodities between 2000 and 2018 and then extract the food commodities to test their effect separately. The results suggest that betas may deviate from the fundamentals in the two samples. However, food commodity betas tend to revert faster to stability between demand and supply, which results in equilibrium in the long-run risk-return factor.

Keywords: Beta herding; State-space model; Commodities; Sentiment (search for similar items in EconPapers)
JEL-codes: G15 Q02 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319305094

DOI: 10.1016/j.frl.2019.08.033

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