 Commodities volatility and the theory of storageJean-François Carpantier and Arnaud Dufays No 2012037, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Abstract: One implication of the theory of storage states that commodity price volatility should increase when inventories are low. We document this volatility feature by estimating asymmetric volatility models for 16 commodity return series, on the period 1994-2011 and show how to account for this feature in Value-at-Risk forecasting. Our contribution is threefold: (i) This study is the first to investigate systematically the volatility implication of the theory of storage for a large panel of commodity types (agriculturals, metals, precious metals and tree crops); (ii) Since inventories are hard to measure and define, especially for high frequency data, we use in the volatility model positive return shocks as a new original proxy for inventories; (iii) We finally develop an original asymmetric version of the spline GARCH model and find that the inventory effect remains robust if we allow the unconditional variance to vary over time. Keywords: asymmetries; commodities; inventory spline GARCH; VaR (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2012037 Access Statistics for this paper More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC. |
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