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Commodities Inventory Effect

  • Jean-François Carpantier

    ()

    (CREA, Université du Luxembourg)

  • Arnaud Dufays

    ()

    (Université Catholique de Louvain)

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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File URL: http://wwwfr.uni.lu/content/download/61993/723776/file/2013-07%20-%20Commodities%20Inventory%20Effect.pdf
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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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