Liquidity commonality in commodities
AbstractWe examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997–2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We find no evidence of a consistent link between stock and commodity liquidity in general. Energy commodities appear to provide a better hedge against equity market liquidity risk than the other commodity families.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 37 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jbf
Commodity; Liquidity; Commonality; Diversification; Hedging;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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