Examining the Common Dynamics of Commodity Futures Prices
Christian Gross ()
No 6317, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster
We investigate the extent and dynamic nature of co-movement in daily futures prices of 18 non-energy commodities over the period 1994-2016. Our analysis provides evidence that co-movement between individual commodities and between commodities and outside financial markets varies strongly over time and that economic events play a key role in shaping the dynamics of co-movement. Our main findings suggest a steady rise in the co-movement of commodity returns between 2004 and 2010, with clear peaks during the period of global financial turmoil, but a steep decline in co-movement after 2013. We also find that overall connectedness of commodity futures markets to shocks in financial markets shows an increasing trend after 2004. Using several risk measures we show that financial investors' risk aversion affects the systematic component of commodity futures returns.
Keywords: Commodity futures markets; connectedness; co-movement; financialization; common factors (search for similar items in EconPapers)
JEL-codes: E44 F30 G12 G13 G15 (search for similar items in EconPapers)
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