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COVID-19 impact on commodity futures volatilities

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  • Zhang, Yongmin
  • Wang, Ruizhi

Abstract

COVID-19 pandemic has affected almost all aspects of the global economy, especially commodity futures markets, due to the disruption risk of global supply chains from the pandemic lockdown. This paper extends ARMA-GARCH models to investigate the pandemic impact on both long-run and short-term volatilities of four major commodity futures. Model-fitting results reveal that the pandemic event has enhanced long-run volatilities for all futures returns, while the daily COVID-19 infection speed has mixed effects on short-term (instantaneous) volatilities. Our extended models and research findings are useful in global supply chain risk management, commodity options trading and regulators’ supervision of inflation risk.

Suggested Citation

  • Zhang, Yongmin & Wang, Ruizhi, 2022. "COVID-19 impact on commodity futures volatilities," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005614
    DOI: 10.1016/j.frl.2021.102624
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    References listed on IDEAS

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    1. Zhang, Yongmin & Sun, Yiru, 2023. "Did U.S. and Chinese investors respond differently to the exogenous shocks from COVID-19 and the war in Ukraine?," International Review of Financial Analysis, Elsevier, vol. 88(C).
    2. Celso-Arellano, Pedro & Gualajara, Victor & Coronado, Semei & Martinez, Jose N. & Venegas-Martínez, Francisco, 2023. "Impact of the global fear index (covid-19 panic) on the S&P global indices associated with natural resources, agribusiness, energy, metals and mining: Granger Causality and Shannon and Rényi Transfer ," MPRA Paper 117138, University Library of Munich, Germany, revised 06 Feb 2023.
    3. Lahmiri, Salim & Bekiros, Stelios & Bezzina, Frank, 2022. "Evidence of the fractal market hypothesis in European industry sectors with the use of bootstrapped wavelet leaders singularity spectrum analysis," Chaos, Solitons & Fractals, Elsevier, vol. 165(P1).

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