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Extreme price co-movement of commodity futures and industrial production growth: An empirical evaluation

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  • Wen, Xiaoqian
  • Xie, Yuxin
  • Pantelous, Athanasios A.

Abstract

This paper studies how the extreme price co-movement of commodity futures indicates industrial production (IP) growth. In this regard, we model synchronized movements and large price changes into one measure by characterizing upside and downside price extremes. We find that the derived price extremes are positively associated with IP growth over the next quarter. We further conclude that such impact is not symmetric, as the impact led by downside extremes is robust whereas that of upside extremes is not. Our results reinforce the informational friction theory as well as those financial studies that emphasize downside risk.

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  • Wen, Xiaoqian & Xie, Yuxin & Pantelous, Athanasios A., 2022. "Extreme price co-movement of commodity futures and industrial production growth: An empirical evaluation," Energy Economics, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:eneeco:v:108:y:2022:i:c:s0140988322000950
    DOI: 10.1016/j.eneco.2022.105915
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    More about this item

    Keywords

    Extreme price co-movement; Commodity futures; Industrial production growth; GAS-factor copula; Panel regressions;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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