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Liquidity commonality in commodities

  • Marshall, Ben R.
  • Nguyen, Nhut H.
  • Visaltanachoti, Nuttawat

We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997–2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We find no evidence of a consistent link between stock and commodity liquidity in general. Energy commodities appear to provide a better hedge against equity market liquidity risk than the other commodity families.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 1 ()
Pages: 11-20

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:11-20
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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