The Changing Relationship Between Commodity Prices and Equity Prices in Commodity Exporting Countries

Barbara Rossi

IMF Economic Review, 2012, vol. 60, issue 4, 533-569

Abstract: The paper explores the linkage between equity and commodity markets, focusing in particular on its evolution over time. It documents that a country's equity market value has significant out-of-sample predictive ability for the future global commodity price index for several primary commodity-exporting countries. The out-of-sample predictive ability of the equity market appears around 2000s. The results are robust to using several control variables as well as firm-level equity data. Finally, the results indicate that exchange rates are a better predictor of commodity prices than equity markets, especially at very short horizons.

Date: 2012
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