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The Impact of COVID-19 on the Volatility of Copper Futures

Author

Listed:
  • Oscar Melo-Vega-Angeles

    (Carrera de Negocios Internacionales, Grupo de Investigación en Economía, Banca y Finanzas, Instituto de Investigación Científica, Universidad de Lima, Lima 15023, Peru)

  • Bryan Chuquillanqui-Lichardo

    (Carrera de Economía, Grupo de Investigación en Economía, Banca y Finanzas, Instituto de Investigación Científica, Universidad de Lima, Lima 15023, Peru)

Abstract

The COVID-19 pandemic has introduced significant uncertainty across various economic sectors, most notably in the industrial sector due to the high volatility in copper futures markets. These markets play a crucial role in the construction, electrical networks, electronic products, and industrial machinery industries. Therefore, the aim of this study is to evaluate the impact of the COVID-19 pandemic on the volatility of copper futures returns from 2 January 2018 to 30 December 2022 using an extended ARMA(m,n)–GARCH(p,q) framework. According to the results, the occurrence of the pandemic nearly doubled the long-run equilibrium volatility of returns compared to the values obtained in the pre-pandemic period. Hence, we conclude that the COVID-19 pandemic has a significant influence on the volatility in the copper futures market.

Suggested Citation

  • Oscar Melo-Vega-Angeles & Bryan Chuquillanqui-Lichardo, 2023. "The Impact of COVID-19 on the Volatility of Copper Futures," Economies, MDPI, vol. 11(7), pages 1-15, July.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:7:p:200-:d:1200793
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    References listed on IDEAS

    as
    1. Mei, Dexiang & Xie, Yutang, 2022. "U.S. grain commodity futures price volatility: Does trade policy uncertainty matter?," Finance Research Letters, Elsevier, vol. 48(C).
    2. Arkady Gevorkyan, 2017. "Renewable versus nonrenewable resources: an analysis of volatility in futures prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(1), pages 19-35, January.
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