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Jumps in commodity markets

Duc Binh Benno Nguyen and Marcel Prokopczuk ()

Journal of Commodity Markets, 2019, vol. 13, issue C, 55-70

Abstract: This paper investigates price jumps in commodity markets. We find that jumps are rare and extreme events but occur less frequently than in stock markets. Nonetheless, jump correlations across commodities can be high depending on the commodity sectors. Energy, metal and grains commodities show high jump correlations while jumps of meats and softs commodities are barely correlated. Looking at cross-market correlations, we find that returns of commodities co-move with the stock market, while jumps can be diversified. Most commodities are strong hedges for U.S. Dollar returns but weak hedges for U.S. Dollar jumps. Most commodities act as both return and jump hedges for Treasury notes.

Keywords: Commodities; Jump risk; Tail risk; Hedge (search for similar items in EconPapers)
JEL-codes: G10 G11 G13 Q02 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Jumps in Commodity Markets (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:13:y:2019:i:c:p:55-70

DOI: 10.1016/j.jcomm.2018.10.002

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Journal of Commodity Markets is currently edited by Marcel Prokopczuk, Betty Simkins and Sjur Westgaard

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