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The Changing Relationship Between Commodity Prices and Equity Prices in Commodity Exporting Countries

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  • Barbara Rossi

Abstract

The paper explores the linkage between equity and commodity markets, focusing in particular on its evolution over time. It documents that a country's equity market value has significant out-of-sample predictive ability for the future global commodity price index for several primary commodity-exporting countries. The out-of-sample predictive ability of the equity market appears around 2000s. The results are robust to using several control variables as well as firm-level equity data. Finally, the results indicate that exchange rates are a better predictor of commodity prices than equity markets, especially at very short horizons.

Suggested Citation

  • Barbara Rossi, 2012. "The Changing Relationship Between Commodity Prices and Equity Prices in Commodity Exporting Countries," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(4), pages 533-569, December.
  • Handle: RePEc:pal:imfecr:v:60:y:2012:i:4:p:533-569
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    References listed on IDEAS

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    Cited by:

    1. Rangga Handika & Rangga Handika & Sigit Triandaru, 2016. "Is the Best Generalized Autoregressive Conditional Heteroskedasticity(p,q) Value-at-risk Estimate also the Best in Reality? An Evidence from Australian Interconnected Power Markets," International Journal of Energy Economics and Policy, Econjournals, vol. 6(4), pages 814-821.
    2. Omura, Akihiro & Todorova, Neda & Li, Bin & Chung, Richard, 2016. "Steel scrap and equity market in Japan," Resources Policy, Elsevier, vol. 47(C), pages 115-124.

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