The realized volatility of commodity futures: Interconnectedness and determinants#

Elie Bouri (), Brian Lucey, Tareq Saeed and Xuan Vinh Vo

International Review of Economics & Finance, 2021, vol. 73, issue C, 139-151

Abstract: Using high frequency data and connectedness measures based on a time-varying parameter vector autoregression (TVP-VAR) model, we study dynamic connectedness among the realized volatility of 15 commodity futures (Gold, Heating oil, Light crude oil, Natural gas, Copper, Platinum, Cocoa, Coffee, Corn, Cotton, Orange Juice, Soybean, Soybean meal, Sugar, and Wheat) from September 22, 2008 to May 28, 2020. The results show strong and moderate levels of volatility connectedness among energy and metals and moderate connectedness levels within the group of agricultural commodities. Cross-commodity connectedness can explain a large portion of volatility connectedness in some cases, highlighting the importance of conducting realized volatility connectedness within a model allowing realized volatilities to be endogenously and simultaneously determined. Connectedness is robust to alternative specifications and varies with time. It is mostly driven by macroeconomic variables and uncertainty, including the term spread of interest rates and real economic activity. However, the analysis shows that some of the drivers of connectedness differ between upper and lower quantiles.

Keywords: Commodity futures; Realized volatility; Connectedness measures; Spillover index; Determinants of connectedness (search for similar items in EconPapers)
JEL-codes: C11 G11 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (59)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:73:y:2021:i:c:p:139-151

DOI: 10.1016/j.iref.2021.01.006

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