Stock‐Versus‐Flow Distinctions, Information, and the Role of Inventory
Rohan A. Christie‐David,
Hong Miao and
Journal of Futures Markets, 2015, vol. 35, issue 11, 1003-1025
A framework is presented that distinguishes commodities by their stock‐versus‐flow orientations. Specifically, the responsiveness of commodities to macroeconomic news is assessed while conditioning on the mediating role of inventories. Such responses are expected to differ based on commodity orientation. Results for gold, silver, and copper are reported. With standard responsiveness tests, gold and silver, our ex‐ante stock‐oriented commodities, exhibit only weak stock orientation, whereas copper exhibits a flow orientation. However, when responses are conditioned on daily movements and concentration of local inventories among traders, the stock orientation of gold and silver becomes evident, while copper also exhibits a sporadic stock orientation. The findings indicate the viability of simple statistical tools in uncovering stock‐versus‐flow orientations for commodities. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:1003–1025, 2015
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