Volatility and Causality in Strategic Commodities: Characteristics, Myth and Evidence
Youngho Chang (),
Zheng Fang () and
Shigeyuki Hamori ()
International Journal of Economics and Finance, 2017, vol. 9, issue 8, 162-178
Commodity prices have fluctuated sharply and Brent oil has been considered the most volatile commodity in price. This paper aims to reveal the true characteristics of the price volatility of six commodities, namely, Brent oil, gold, silver, wheat, corn and soybean and to verify the existence of a long-run relationship and causation among each pair of commodity prices. It finds that there has been persistent volatility in prices of all six commodities from 1986 to 2010. Contrary to the common belief, however, Brent oil appears not to be the most volatile in price. Rather the prices of precious metals and agricultural commodities have been more volatile than Brent oil for some time periods. It also finds that there has been a long-run relationship between the prices of Brent oil and soybean, of Brent oil and wheat, and a bilateral causality relationship between them, which implies that there has been a simultaneous impact on the price trajectories of these commodities.
Keywords: GARCH; asymmetry; news impact curve; cointegration; Granger-causality (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:8:p:162-178
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