Liquidity commonality in commodities

Ben Marshall, Nhut H. Nguyen and Nuttawat Visaltanachoti ()

Journal of Banking & Finance, 2013, vol. 37, issue 1, 11-20

Abstract: We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997–2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We find no evidence of a consistent link between stock and commodity liquidity in general. Energy commodities appear to provide a better hedge against equity market liquidity risk than the other commodity families.

Keywords: Commodity; Liquidity; Commonality; Diversification; Hedging (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:1:p:11-20

DOI: 10.1016/j.jbankfin.2012.08.013

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