IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v13y2025i1p5-d1562677.html
   My bibliography  Save this article

Macroeconomic Conditions, Speculation, and Commodity Futures Returns

Author

Listed:
  • Ramesh Adhikari

    (School of Business, Cal Poly Humboldt, Arcata, CA 95521, USA)

  • Kyle J. Putnam

    (School of Business, Linfield University, McMinnville, OR 97128, USA)

Abstract

This paper examines the dynamic relationships between speculative activities, commodity returns, and macroeconomic conditions across five sectors compassing 29 commodities. Using weekly data spanning from January 2000 to July 2023, we construct comprehensive measures of commodity market speculation across five sectors and examine their sector-specific impact on returns through advanced econometric methods, including dynamic conditional correlation models, quantile regressions, Markov-switching models, and time-varying Granger causality tests. Our results reveal that the impact of speculative activities on commodity futures returns is conditional on the commodity sector and prevailing macroeconomic conditions. Moreover, the relationship between macroeconomic factors, speculative activities, and commodity futures returns is time varying. Among the macroeconomic variables, the financial stress indicator, as measured by the St. Louis Fed Financial Stress Index, shows a significant ability to predict commodity futures returns. The relationship between speculation and commodity returns is bi-directional across all sectors.

Suggested Citation

  • Ramesh Adhikari & Kyle J. Putnam, 2025. "Macroeconomic Conditions, Speculation, and Commodity Futures Returns," IJFS, MDPI, vol. 13(1), pages 1-26, January.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:1:p:5-:d:1562677
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/13/1/5/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/13/1/5/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ing-Haw Cheng & Wei Xiong, 2014. "Financialization of Commodity Markets," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 419-441, December.
    2. Yannick Le Pen & Benoît Sévi, 2013. "Futures trading and the excess comovement of commodity prices," Post-Print hal-01613916, HAL.
    3. Kang, Wenjin & Tang, Ke & Wang, Ningli, 2023. "Financialization of commodity markets ten years later," Journal of Commodity Markets, Elsevier, vol. 30(C).
    4. Haase, Marco & Huss, Matthias, 2018. "Guilty speculators? Range-based conditional volatility in a cross-section of wheat futures," Journal of Commodity Markets, Elsevier, vol. 10(C), pages 29-46.
    5. Working, Holbrook, 1960. "Speculation on Hedging Markets," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 1(2), pages 1-36.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robe, Michel A. & Roberts, John S., 2024. "Four Commitments of Traders Reports puzzles, revisited: Answers from grains and oilseeds futures markets," Journal of Commodity Markets, Elsevier, vol. 34(C).
    2. Iuga, Iulia Cristina & Mudakkar, Syeda Rabab & Dragolea, Larisa Loredana, 2024. "Agricultural commodities market reaction to COVID-19," Research in International Business and Finance, Elsevier, vol. 69(C).
    3. Carter, Colin A. & Steinbach, Sandro, 2024. "Did grain futures prices overreact to the Russia–Ukraine war due to herding?," Journal of Commodity Markets, Elsevier, vol. 35(C).
    4. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.
    5. Ohashi, Kazuhiko & Okimoto, Tatsuyoshi, 2016. "Increasing trends in the excess comovement of commodity prices," Journal of Commodity Markets, Elsevier, vol. 1(1), pages 48-64.
    6. Dudda, Tom L. & Klein, Tony & Nguyen, Duc Khuong & Walther, Thomas, 2022. "Common Drivers of Commodity Futures?," QBS Working Paper Series 2022/05, Queen's University Belfast, Queen's Business School.
    7. Filippo Natoli, 2021. "Financialization Of Commodities Before And After The Great Financial Crisis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 488-511, April.
    8. Adam Zaremba, 2016. "Strategies Based on Momentum and Term Structure in Financialized Commodity Markets," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 7(1), pages 31-46.
    9. Smimou, K. & Bosch, D. & Filbeck, G., 2024. "Commodities and Policy Uncertainty Channel(s)," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 351-379.
    10. Nikolay Gospodinov & Ibrahim Jamali, 2018. "Monetary policy uncertainty, positions of traders and changes in commodity futures prices," European Financial Management, European Financial Management Association, vol. 24(2), pages 239-260, March.
    11. Boyd, Naomi E. & Harris, Jeffrey H. & Li, Bingxin, 2018. "An update on speculation and financialization in commodity markets," Journal of Commodity Markets, Elsevier, vol. 10(C), pages 91-104.
    12. Hang Shao & Zhou Li, 2025. "The predictive effect of heterogeneous investor behavior on commodity pricing," Palgrave Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
    13. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    14. Bonnier, Jean-Baptiste, 2021. "Speculation and informational efficiency in commodity futures markets," Journal of International Money and Finance, Elsevier, vol. 117(C).
    15. Filippo Natoli, 2018. "Analyzing the structural transformation of commodity markets: financialization revisited," Questioni di Economia e Finanza (Occasional Papers) 419, Bank of Italy, Economic Research and International Relations Area.
    16. Abricha, Amal & Ben Amar, Amine & Bellalah, Makram, 2024. "Commodity futures markets under stress and stress-free periods: Further insights from a quantile connectedness approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 229-246.
    17. Yuhe Zhao & Ronghua Ju, 2025. "Investor Structure and Corn Futures Price Volatility in China: Evidence Based on the Agent-Based Model," Computational Economics, Springer;Society for Computational Economics, vol. 65(2), pages 937-961, February.
    18. Algirdas Justinas Staugaitis & Bernardas Vaznonis, 2022. "Financial Speculation Impact on Agricultural and Other Commodity Return Volatility: Implications for Sustainable Development and Food Security," Agriculture, MDPI, vol. 12(11), pages 1-27, November.
    19. Figuerola-Ferretti, Isabel & McCrorie, J. Roderick & Paraskevopoulos, Ioannis, 2020. "Mild explosivity in recent crude oil prices," Energy Economics, Elsevier, vol. 87(C).
    20. Yao, Wei, 2025. "The US Quantitative Easing Monetary Policy and Commodities’ Prices," Other publications TiSEM 185d14d3-9dc2-4276-82ec-e, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijfss:v:13:y:2025:i:1:p:5-:d:1562677. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.