EconPapers    
Economics at your fingertips  
 

The role of economic and financial uncertainties in predicting commodity futures returns and volatility: Evidence from a nonparametric causality-in-quantiles test

Walid Bahloul (), Mehmet Balcilar, Juncal Cuñado () and Rangan Gupta

Journal of Multinational Financial Management, 2018, vol. 45, issue C, 52-71

Abstract: We analyze the ability of economic and financial uncertainties in predicting movements in commodity futures markets. Using daily data over the period of 8th May, 1992 to 31st August, 2016 on 21 commodity futures covering agriculture, energy, metals and livestock, we find that: (a) Linear predictive tests provide virtually no evidence of predictability; (b) Linear models are misspecified due to nonlinearity and hence, results from the framework cannot be relied upon, and; (c) Using a k-th order nonparametric causality-in-quantiles test, which is robust to misspecification in the presence of nonlinearities, we find evidence that measures of uncertainty can predict returns and/or volatility of as many as 20 of the commodities considered at least at one point of their respective conditional distributions for returns and variance. In general, we highlight the importance of modeling nonlinearity, higher order moments, and quantiles of returns and volatility when carrying out predictability analysis involving commodity futures and uncertainty.

Keywords: Economic and financial; Uncertainty; Commodity futures markets; Returns; Volatility; Nonparametric causality-in-quantiles test (search for similar items in EconPapers)
JEL-codes: C22 G13 Q02 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (63)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042444X17302608
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Role of Economic and Financial Uncertainties in Predicting Commodity Futures Returns and Volatility: Evidence from a Nonparametric Causality-in-Quantiles Test (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:45:y:2018:i:c:p:52-71

DOI: 10.1016/j.mulfin.2018.04.002

Access Statistics for this article

Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth

More articles in Journal of Multinational Financial Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-23
Handle: RePEc:eee:mulfin:v:45:y:2018:i:c:p:52-71