IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v49y2016i3p949-967.html

Commodity prices and related equity prices

Author

Listed:
  • Shiu-Sheng Chen

Abstract

This paper shows that commodity-sensitive stock price indices have strong power in predicting nominal and real commodity prices at short horizons (one-month-ahead predictions) using both in- and out-of-sample tests. The forecasts based on commodity-sensitive stock price indices are able to significantly outperform naïve no-change forecasts. For example, the one-month-ahead forecasts for nominal commodity prices reduce the mean squared prediction error by between 1.5% (for natural gas prices) and 20% (for copper prices). Moreover, the one-month-ahead directional forecast is found to perform significantly better than a 50:50 coin toss. As stock prices are not subject to revision, the proposed variable, which reflects timely and readily available market information, can potentially be a valuable predictor and thereby help to improve the accuracy of commodity price forecasts.

Suggested Citation

  • Shiu-Sheng Chen, 2016. "Commodity prices and related equity prices," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 949-967, August.
    • Handle: RePEc:cje:issued:v:49:y:2016:i:3:p:949-967
    DOI: 10.1111/caje.12220
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/caje.12220
    Download Restriction: access restricted to subscribers
    File URL: https://libkey.io/10.1111/caje.12220?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Schischke, A. & Papenfuß, P. & Brem, M. & Kurz, P. & Rathgeber, A.W., 2023. "Sustainable energy transition and its demand for scarce resources: Insights into the German Energiewende through a new risk assessment framework," Renewable and Sustainable Energy Reviews, Elsevier, vol. 176(C).
    2. Drachal, Krzysztof, 2019. "Forecasting prices of selected metals with Bayesian data-rich models," Resources Policy, Elsevier, vol. 64(C).
    3. Oikonomou, Konstantinos & Damigos, Dimitris & Dimitriou, Dimitrios, 2025. "Globality in the metal markets: Leveraging cross-learning to forecast aluminum and copper prices," Resources Policy, Elsevier, vol. 103(C).
    4. Krzysztof Drachal & Michał Pawłowski, 2024. "Forecasting Selected Commodities’ Prices with the Bayesian Symbolic Regression," IJFS, MDPI, vol. 12(2), pages 1-56, March.
    5. Krzysztof Drachal, 2018. "Some Novel Bayesian Model Combination Schemes: An Application to Commodities Prices," Sustainability, MDPI, vol. 10(8), pages 1-27, August.
    6. Djeutem, Edouard & Dunbar, Geoffrey R., 2022. "Uncovered return parity: Equity returns and currency returns," Journal of International Money and Finance, Elsevier, vol. 128(C).
    7. Wang, Qiao & Balvers, Ronald, 2021. "Determinants and predictability of commodity producer returns," Journal of Banking & Finance, Elsevier, vol. 133(C).

    More about this item

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:49:y:2016:i:3:p:949-967. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prof. Werner Antweiler (email available below). General contact details of provider: https://edirc.repec.org/data/ceaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.