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COVID-19 and commodity pricing premium: Evidence from the Chinese market

Author

Listed:
  • Zhang, Lu
  • Hsieh, Pei-lin
  • Chen, Haiqiang

Abstract

Our paper studies the impact of the COVID-19 epidemic on commodity pricing premiums in the Chinese commodity futures market. After summarizing the explanatory power of documented benchmark pricing factors, we apply the difference-in-difference regression for our event study. We document a substantial impact of the COVID-19 pandemic on increasing the commodity basis premium by at least 30%. Basis-momentum premium, especially for agriculture futures, also increases during the epidemic. The results are robust and validated by sub-sample regressions. The influence of COVID-19 on the commodity market is more prevailing than the trade war.

Suggested Citation

  • Zhang, Lu & Hsieh, Pei-lin & Chen, Haiqiang, 2023. "COVID-19 and commodity pricing premium: Evidence from the Chinese market," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323002714
    DOI: 10.1016/j.frl.2023.103899
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    More about this item

    Keywords

    COVID-19; Epidemic; Commodity market; Commodity pricing premium; Commodity futures returns;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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