Liquidity commonality in commodities
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian T. Brownlees & Giampiero Gallo, 2006.
"Financial Econometric Analysis at Ultra–High Frequency: Data Handling Concerns,"
Econometrics Working Papers Archive
wp2006_03, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
- Brownlees, C.T. & Gallo, G.M., 2006. "Financial econometric analysis at ultra-high frequency: Data handling concerns," Computational Statistics & Data Analysis, Elsevier, vol. 51(4), pages 2232-2245, December.
- Edelstein, Paul & Kilian, Lutz, 2009. "How sensitive are consumer expenditures to retail energy prices?," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 766-779, September.
- Kamara, Avraham & Lou, Xiaoxia & Sadka, Ronnie, 2008. "The divergence of liquidity commonality in the cross-section of stocks," Journal of Financial Economics, Elsevier, vol. 89(3), pages 444-466, September.
- Driesprong, Gerben & Jacobsen, Ben & Maat, Benjamin, 2008. "Striking oil: Another puzzle?," Journal of Financial Economics, Elsevier, vol. 89(2), pages 307-327, August.
- Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2000. "Commonality in liquidity," Journal of Financial Economics, Elsevier, vol. 56(1), pages 3-28, April.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007.
"Market liquidity and funding liquidity,"
LSE Research Online Documents on Economics
24478, London School of Economics and Political Science, LSE Library.
- Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
- Lasse Heje Pederson & Markus K Brunnermeier, 2007. "Market Liquidity and Funding Liquidity," FMG Discussion Papers dp580, Financial Markets Group.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
- Pukthuanthong, Kuntara & Roll, Richard, 2011. "Gold and the Dollar (and the Euro, Pound, and Yen)," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2070-2083, August.
- de Roon, F.A. & Nijman, T.E. & Veld, C.H., 2000.
"Hedging pressure effects in futures markets,"
Other publications TiSEM
3dfe2c9f-3194-4751-9b34-1, Tilburg University, School of Economics and Management.
- Karolyi, G. Andrew & Lee, Kuan-Hui & van Dijk, Mathijs A., 2012. "Understanding commonality in liquidity around the world," Journal of Financial Economics, Elsevier, vol. 105(1), pages 82-112.
- Hasbrouck, Joel & Seppi, Duane J., 2001. "Common factors in prices, order flows, and liquidity," Journal of Financial Economics, Elsevier, vol. 59(3), pages 383-411, March.
- Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
- Sanders, Dwight R. & Boris, Keith & Manfredo, Mark, 2004. "Hedgers, funds, and small speculators in the energy futures markets: an analysis of the CFTC's Commitments of Traders reports," Energy Economics, Elsevier, vol. 26(3), pages 425-445, May.
- Chan, Kam Fong & Treepongkaruna, Sirimon & Brooks, Robert & Gray, Stephen, 2011. "Asset market linkages: Evidence from financial, commodity and real estate assets," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1415-1426, June.
- Goyenko, Ruslan Y. & Holden, Craig W. & Trzcinka, Charles A., 2009. "Do liquidity measures measure liquidity?," Journal of Financial Economics, Elsevier, vol. 92(2), pages 153-181, May.
- Korajczyk, Robert A. & Sadka, Ronnie, 2008. "Pricing the commonality across alternative measures of liquidity," Journal of Financial Economics, Elsevier, vol. 87(1), pages 45-72, January.
- Allaudeen Hameed & Wenjin Kang & S. Viswanathan, 2010. "Stock Market Declines and Liquidity," Journal of Finance, American Finance Association, vol. 65(1), pages 257-293, 02.
- Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
- Tarun Chordia, 2005. "An Empirical Analysis of Stock and Bond Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 85-129.
- Brockman, Paul & Chung, Dennis Y. & Pérignon, Christophe, 2009. "Commonality in Liquidity: A Global Perspective," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(04), pages 851-882, August.
- Ben R. Marshall & Nhut H. Nguyen & Nuttawat Visaltanachoti, 2012. "Commodity Liquidity Measurement and Transaction Costs," Review of Financial Studies, Society for Financial Studies, vol. 25(2), pages 599-638.
- repec:fip:fedgsq:y:2008:x:60 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:11-20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.