Co-Movement of Major Commodity Price Returns: A Time-Series Assessment
44 Pages Posted: 22 Aug 2014
Date Written: June 13, 2014
Abstract
This paper provides a comprehensive analysis of the degree of co-movement among the nominal price returns of 11 major energy, agricultural, and food commodities using monthly data between 1970 and 2013. The authors study the extent and the time evolution of unconditional and conditional correlations using a uniform-spacings testing approach, a multivariate dynamic conditional correlation model and a rolling regression procedure. The authors find that (1) the price returns of energy and agricultural commodities are highly correlated; (2) the overall level of co-movement among commodities increases in recent years, especially between energy and agricultural commodities and in particular in the cases of maize and soybean oil, which are important inputs in the production of biofuels and (3) stock market volatility is positively associated with the co-movement of price returns across markets, especially since 2007.
Keywords: co-movement, Commodities, Economic models, markets, Prices, time-series models
JEL Classification: C32, E30, Q02
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