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The relationship between commodity markets and commodity mutual funds: A wavelet-based analysis

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  • Antonakakis, Nikolaos
  • Chang, Tsangyao
  • Cunado, Juncal
  • Gupta, Rangan

Abstract

This paper examines the causal relationship between commodities funds and returns using monthly data for the period May 1997–August 2015. Given the strong evidence of nonlinearity and structural breaks, we use wavelets to analyse causality between the two variables at both time and frequency domains. Wavelet coherency reveals that these two variables are primarily positively related in the short-run and over the period of 2008–2015. When we investigate the phase differences over this period, we observe that returns have predicted flows over the period of 2008–2012, with causality running in the other direction thereafter.

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  • Antonakakis, Nikolaos & Chang, Tsangyao & Cunado, Juncal & Gupta, Rangan, 2018. "The relationship between commodity markets and commodity mutual funds: A wavelet-based analysis," Finance Research Letters, Elsevier, vol. 24(C), pages 1-9.
    • Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:1-9
    DOI: 10.1016/j.frl.2017.03.005
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    2. Tule, Moses K. & Salisu, Afees A. & Chiemeke, Charles C., 2019. "Can agricultural commodity prices predict Nigeria's inflation?," Journal of Commodity Markets, Elsevier, vol. 16(C).
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    More about this item

    Keywords

    Commodity returns and flows; Granger causality; Nonlinearity; Time and frequency domains; Wavelet;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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