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Commodities Inventory Effect

Author Info

  • Jean-François Carpantier

    ()

    (CREA, Université du Luxembourg)

  • Arnaud Dufays

    ()

    (Université Catholique de Louvain)

Abstract

Does commodity price volatility increase when inventories are low? We are the first ones to document this relationship. To that aim, we estimate asym- metric volatility models for a large set of commodities over 1994-2011. Since inventories are hard to measure, especially for high frequency data, we use positive return shocks as a new original proxy for inventories and find that asymmetric GARCH models reveal a significant inventory effect for many commodities. The results look robust. They hold if we allow the uncondi- tional variance to vary over time and if we relax the parametric form.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 13-07.

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Date of creation: 2013
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Handle: RePEc:luc:wpaper:13-07
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Keywords: Asymmetries; Commodities; Inventory; Spline GARCH; VaR.;

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Find related papers by JEL classification:
  • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
  • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
  • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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Cited by:

  1. CARPANTIER, Jean-François & SAMKHARADZE, Besik, 2012. "The asymmetric commodity inventory effect on the optimal hedge ratio," CORE Discussion Papers 2012020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. PIERRET, Diane, 2013. "The systemic risk of energy markets," CORE Discussion Papers 2013018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. BAUWENS, Luc & HAFNER, Christian & LAURENT, Sébastien, 2011. "Volatility models," CORE Discussion Papers 2011058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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