Modeling dynamics of metal price series via state space approach with two common factors

Vasyl Golosnoy and Anja Rossen

Empirical Economics, 2018, vol. 54, issue 4, No 4, 1477-1501

Abstract: Abstract In this paper, we model the dynamics of 100 years long monthly price series of eight nonferrous and precious metals. Applying the state space framework, we impose and identify two common factors related to nonferrous and precious metals, respectively, which exhibit quite distinct autoregressive dynamics. The preferred two common factor specifications outperform single common factor approaches, especially in the second half of the sample. Furthermore, we provide an interpretation for the extracted common factors by investigating their exposure to the major macroeconomic fundamentals.

Keywords: Kalman filter; Nonferrous metals; Precious metals; State space models (search for similar items in EconPapers)
JEL-codes: C32 C52 E30 F00 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00181-017-1267-9

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