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Commodity futures returns: more memory than you might think!

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  • Jerry Coakley
  • Neil Kellard
  • Jian Wang

Abstract

This paper investigates long-range dependence in 14 commodity and 3 other financial futures returns series from 1993 to 2009 and shows that long memory is a pervasive phenomenon in contrast to the extant evidence. Utilizing a semi-parametric wavelet-based estimator with time windows, the results provide overwhelming evidence of time-varying long-range dependence in all futures returns series. Structural break tests indicate multiple regimes of dependence, in the majority of which the persistence parameter is statistically significant. The results also provide evidence of predominantly negative parameter values which are known as anti-persistence. The latter is consistent with investor overreaction to shocks and suggests temporary departures from market efficiency.

Suggested Citation

  • Jerry Coakley & Neil Kellard & Jian Wang, 2016. "Commodity futures returns: more memory than you might think!," The European Journal of Finance, Taylor & Francis Journals, vol. 22(14), pages 1457-1483, November.
    • Handle: RePEc:taf:eurjfi:v:22:y:2016:i:14:p:1457-1483
    DOI: 10.1080/1351847X.2015.1025989
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    Cited by:

    1. Kerstin Lamert & Benjamin R. Auer & Ralf Wunderlich, 2023. "Discretization of continuous-time arbitrage strategies in financial markets with fractional Brownian motion," Papers 2311.15635, arXiv.org.

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