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Returns in Commodities Futures Markets and Financial Speculation: A Multivariate GARCH Approach

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Author Info

  • Matteo Manera

    (University of Milan-Bicocca, Milan and Fondazione Eni Enrico Mattei, Milan)

  • Marcella Nicolini

    (University of Pavia, Pavia and Fondazione Eni Enrico Mattei, Milan)

  • Ilaria Vignati

    (Fondazione Eni Enrico Mattei, Milan)

Abstract

This paper analyses futures prices for four energy commodities (light sweet crude oil, heating oil, gasoline and natural gas) and five agricultural commodities (corn, oats, soybean oil, soybeans and wheat), over the period 1986-2010. Using CCC and DCC multivariate GARCH models, we find that financial speculation is poorly significant in modelling returns in commodities futures while macroeconomic factors help explaining returns in commodities futures. Moreover, spillovers between commodities are present and the conditional correlations among commodities are high and time-varying.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2012.23.

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Date of creation: Apr 2012
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Handle: RePEc:fem:femwpa:2012.23

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Keywords: Energy; Commodities; Futures Markets; Financial Speculation; Multivariate GARCH;

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References

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  1. Du, Xiaodong & Yu, Cindy L. & Hayes, Dermot J., 2011. "Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis," Energy Economics, Elsevier, vol. 33(3), pages 497-503, May.
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  7. Chia-Lin Chang & Michael McAleer & Roengchai Tansuchat, 2009. "Modelling Conditional Correlations for Risk Diversification in Crude Oil Markets," CARF F-Series CARF-F-162, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  8. Matteo Manera & Michael McAleer & Margherita Grasso, 2006. "Modelling time-varying conditional correlations in the volatility of Tapis oil spot and forward returns," Applied Financial Economics, Taylor & Francis Journals, vol. 16(7), pages 525-533.
  9. Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
  10. Matteo Manera & Alessandro Lanza & Michael McAleer, 2004. "Modelling Dynamic Conditional Correlations in WTI Oil Forward and Futures Returns," Working Papers 2004.72, Fondazione Eni Enrico Mattei.
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  20. repec:wop:syecwp:2000-2 is not listed on IDEAS
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  23. Bahattin Buyuksahin & Jeffrey H. Harris, 2011. "Do Speculators Drive Crude Oil Futures Prices?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 167-202.
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Citations

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Cited by:
  1. Claudio Morana, 2012. "Oil Price Dynamics, Macro-Finance Interactions and the Role of Financial Speculation," Working Papers 2012.07, Fondazione Eni Enrico Mattei.
  2. Walid Mensi & Shawkat Hammoudeh & Duc Khuong Nguyen & Seong-Min Yoon, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Working Papers 2014-160, Department of Research, Ipag Business School.
  3. Creti, Anna & Joëts, Marc & Mignon, Valérie, 2013. "On the links between stock and commodity markets' volatility," Energy Economics, Elsevier, vol. 37(C), pages 16-28.

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