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Twenty years of jumps in commodity markets

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  • Julien Chevallier
  • Florian Ielpo

Abstract

In this article, we provide statistical evidence around jumps affecting commodity returns. Using nearly 20 years of daily data, we use Laurent, Lecourt, and Palm's (2011) methodology to jump extraction, and discuss various aspects of the estimated jump activity. On average across various commodity markets, we find a high number of days for which returns exhibit the presence of jumps, consistently with the intuition that commodities are affected by large price fluctuations. We emphasize that the post-jump average return depends on the commodity sector considered (e.g. agriculture, energy, or metals). We also show evidence of a jump-to-volatility channel for commodities (similar to the effect usually found for equities). Finally, we diagnose around 40 dates during which commodity indices, stocks, bonds and currencies `co-jump', revealing a tail dependence between standard and alternative assets.

Suggested Citation

  • Julien Chevallier & Florian Ielpo, 2014. "Twenty years of jumps in commodity markets," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(1), pages 64-82, January.
  • Handle: RePEc:taf:irapec:v:28:y:2014:i:1:p:64-82
    DOI: 10.1080/02692171.2013.826637
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    File URL: http://hdl.handle.net/10.1080/02692171.2013.826637
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    1. repec:dau:papers:123456789/6805 is not listed on IDEAS
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    Cited by:

    1. Julien Chevallier & Stéphane Goutte, 2015. "Detecting jumps and regime switches in international stock markets returns," Applied Economics Letters, Taylor & Francis Journals, vol. 22(13), pages 1011-1019, September.
    2. repec:eee:pacfin:v:45:y:2017:i:c:p:186-210 is not listed on IDEAS
    3. Nguyen, Duc Binh Benno & Prokopczuk, Marcel, 2019. "Jumps in commodity markets," Journal of Commodity Markets, Elsevier, vol. 13(C), pages 55-70.
    4. repec:eee:eneeco:v:78:y:2019:i:c:p:615-628 is not listed on IDEAS
    5. Boako, Gideon & Alagidede, Paul, 2016. "Global commodities and African stocks: A ‘market of one?’," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 226-237.

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