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Common Drivers of Commodity Futures?

Author

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  • Tom Dudda
  • Tony Klein
  • Duc Khuong Nguyen
  • Thomas Walther

Abstract

We study potential drivers for a large cross-section of commodity futures. Unlike previous studies, we examine the effect of monthly drivers on daily returns using mixed- frequency Granger causality tests. We find real economic activity as a main driver on a monthly basis, whereas financial variables seem to affect returns at daily frequency. The linkages are time-varying for various stages of the financialization of commodity markets with an overall dissipating impact in the recent period of de-financialization. As our results strongly differ from traditional low-frequency Granger causality tests under the temporal aggregation of futures returns, we show the economic value of accessing infor- mation at a higher frequency in an out-of-sample trading study. Our findings emphasize the importance of using mixed-frequency techniques to uncover relationships between monthly-published macroeconomic variables and commodity prices.

Suggested Citation

  • Tom Dudda & Tony Klein & Duc Khuong Nguyen & Thomas Walther, 2022. "Common Drivers of Commodity Futures?," Working Papers 2207, Utrecht School of Economics.
    • Handle: RePEc:use:tkiwps:2207
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    More about this item

    Keywords

    Commodity futures; VAR; Granger causality; Mixed data sampling;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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