On the excess co-movement of commodity prices--A note about the role of fundamental factors in short-run dynamics
AbstractSince the influential paper by Pindyck and Rotemberg (1990) [The excess co-movement of commodity prices. The Economic Journal 100, 1173-1189], there is a common belief that prices of unrelated commodities tend to move together in excess of what can be explained by fundamentals. In this paper, we consider monthly data of 51 commodities from 1980 to 2008 to confirm that raw resources exhibit co-movement at high frequencies. Nonetheless, focusing on oil and six metal prices, we present evidence that the high level of correlation between cycles of commodity prices can be explained to a large extent by common shocks to inventory levels. Once the influences of supply and demand are filtered out, it appears that the links between commodity prices are rather loose.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Policy.
Volume (Year): 37 (2009)
Issue (Month): 10 (October)
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Web page: http://www.elsevier.com/locate/enpol
Oil prices Commodity prices Co-movement;
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- Karoline Krätschel & Torsten Schmidt, 2012. "Long-run Trends or Short-run Fluctuations – What Establishes the Correlation between Oil and Food Prices?The Interplay of Standardized Tests and Incentives – An Econometric Analysis with Data from," Ruhr Economic Papers 0357, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Mohamed El Hedi Arouri & Shawkat Hammoudeh & Amine Lahiani & Duc Khuong Nguyen, 2013.
"Long memory and structural breaks in modeling the return and volatility dynamics of precious metals,"
- Arouri, Mohamed El Hedi & Hammoudeh, Shawkat & Lahiani, Amine & Nguyen, Duc Khuong, 2012. "Long memory and structural breaks in modeling the return and volatility dynamics of precious metals," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 207-218.
- Cifarelli, Giulio & Paladino, Giovanna, 2011. "Hedging vs. speculative pressures on commodity futures returns," MPRA Paper 28229, University Library of Munich, Germany.
- Huang, Wen-Hsiu & Chao, Ming-Che, 2012. "The effects of oil prices on the price indices in Taiwan: International or domestic oil prices matter?," Energy Policy, Elsevier, vol. 45(C), pages 730-738.
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