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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. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425.
  2. Yu-Chin Chen & Kenneth S. Rogoff & Barbara Rossi, 2010. "Can Exchange Rates Forecast Commodity Prices?," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1145-1194, August.
  3. 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.
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  19. Chevallier, Julien, 2009. "Carbon futures and macroeconomic risk factors : a view from the EU ETS," Economics Papers from University Paris Dauphine 123456789/4210, Paris Dauphine University.
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  21. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
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Cited by:
  1. Anna Creti & Marc Joëts & Valérie Mignon, 2012. "On the links between stock and commodity markets' volatility," EconomiX Working Papers 2012-42, University of Paris West - Nanterre la Défense, EconomiX.
  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. Khan, Aftab & Masih, Mansur, 2014. "Correlation between Islamic stock and Commodity markets: An investigation into the impact of financial crisis and financialization of commodity markets," MPRA Paper 56979, University Library of Munich, Germany.
  4. Claudio Morana, 2013. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Working Papers 225, University of Milano-Bicocca, Department of Economics, revised Nov 2013.

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