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Are commodity markets characterized by herd behaviour?

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  • Marie Steen
  • Ole Gjolberg

Abstract

Twenty years ago, Pindyck and Rotemberg concluded that commodity prices exhibited excessive co-movements and that commodity markets were characterized by herd behaviour. The herding hypothesis has recently experienced a revival. A number of studies have concluded that commodities have become ‘financialized’ and contaminated by the stock market because of the large influx of hedge funds, index trackers and financial investors. Analysing monthly prices of 20 commodities for the period 1986--2010, we find that there has been a tendency toward increased co-movements across commodities and between commodities and the stock market after 2004. However, this result is mainly driven by the extreme price movements after 2008. There is no strong evidence of financialization or contamination from the market activities of financial investors prior to 2008.

Suggested Citation

  • Marie Steen & Ole Gjolberg, 2013. "Are commodity markets characterized by herd behaviour?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(1), pages 79-90, January.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:1:p:79-90
    DOI: 10.1080/09603107.2012.707770
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    File URL: http://hdl.handle.net/10.1080/09603107.2012.707770
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    References listed on IDEAS

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    1. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
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    1. repec:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-017-2659-0 is not listed on IDEAS
    2. repec:eee:riibaf:v:41:y:2017:i:c:p:148-157 is not listed on IDEAS
    3. repec:eee:asieco:v:52:y:2017:i:c:p:32-44 is not listed on IDEAS
    4. Babalos, Vassilios & Stavroyiannis, Stavros & Gupta, Rangan, 2015. "Do commodity investors herd? Evidence from a time-varying stochastic volatility model," Resources Policy, Elsevier, vol. 46(P2), pages 281-287.
    5. Gnutzmann, Hinnerk & Spiewanowski, Piotr, 2016. "Did the Fertilizer Cartel Cause the Food Crisis?," Annual Conference 2016 (Augsburg): Demographic Change 145777, Verein für Socialpolitik / German Economic Association.
    6. Demirer, Rıza & Lee, Hsiang-Tai & Lien, Donald, 2015. "Does the stock market drive herd behavior in commodity futures markets?," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 32-44.
    7. repec:eee:ecmode:v:68:y:2018:i:c:p:318-328 is not listed on IDEAS

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