The dynamics of commodity return comovements

Prokopczuk, Marcel, Wese Simen, Chardin ORCID: 0000-0003-4119-3024 and Wichmann, Robert (2021) The dynamics of commodity return comovements. JOURNAL OF FUTURES MARKETS, 41 (10). pp. 1597-1617. ISSN 0270-7314, 1096-9934

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Official URL: https://doi.org/10.1002/fut.22222

Abstract

<jats:title>Abstract</jats:title><jats:p>We compare factor models with respect to their ability to explain commodity futures return comovements. A simple one‐factor model based on the first principal component extracted from a panel of commodity returns outperforms a macroeconomic model, and explains most of the realized comovements. We find that intersectoral correlations display more time variations than intrasectoral correlations. Dissecting the evidence further, we find that comovements are driven by the variation of the factor as opposed to exposure to it. Our results cast doubt on the persistence of the effects of financialization and emphasize the importance of the dynamics of the factor variance.</jats:p>

Item Type:	Article
Uncontrolled Keywords:	commodity markets, comovement, factor model, financialization
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	27 Jan 2022 16:00
Last Modified:	06 Dec 2024 19:25
DOI:	10.1002/fut.22222
Open Access URL:	https://onlinelibrary.wiley.com/doi/10.1002/fut.22...
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3147726