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Commodity markets through the business cycle

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  • Julien Chevallier
  • Mathieu Gatumel
  • Florian Ielpo

Abstract

From 2008 to 2011, commodity markets experienced growing attention from the banking industry for various reasons: the summer 2008 oil price swing, the price surge in an ounce of gold, or sharp variations in agricultural prices. As a consequence, can we hypothesize the existence of a global connection between commodities and economic cycles? If these recent events suggest that commodity markets are strongly related to the business cycle, this evidence goes nevertheless against the widespread intuition that commodity markets are a strong source of diversification in a standard cash-bond-equity portfolio. Based on a data-set from 1990 to present, this paper investigates this issue by (i) looking at the reaction of commodity markets to economic news, and (ii) using a Markov regime-switching model to analyse economic regimes and commodity markets as an asset class.

Suggested Citation

  • Julien Chevallier & Mathieu Gatumel & Florian Ielpo, 2014. "Commodity markets through the business cycle," Quantitative Finance, Taylor & Francis Journals, vol. 14(9), pages 1597-1618, September.
  • Handle: RePEc:taf:quantf:v:14:y:2014:i:9:p:1597-1618
    DOI: 10.1080/14697688.2013.842651
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    Cited by:

    1. Hayette Gatfaoui, 2018. "Diversifying portfolios of U.S. stocks with crude oil and natural gas: A regime-dependent optimization with several risk measures," Papers 1811.02382, arXiv.org.
    2. repec:eee:eneeco:v:65:y:2017:i:c:p:424-433 is not listed on IDEAS
    3. Chevallier, Julien & Ielpo, Florian, 2017. "Investigating the leverage effect in commodity markets with a recursive estimation approach," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 763-778.

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