The Determinants of Extreme Commodity Prices
Fat-tailed commodity price innovations are well-documented in the literature and long recognized as disruptive for consumers and producers, yet little is known about what factors drive such extreme events. Utilizing a wide range of factors from the economiccs and finance literature and quantile regression techniques, we shed light on this issue. Our models explain more variation in extreme than in median price innovations. Common global financial and demand factors account for a greater proportion of extreme aily spot price variations than do commodity-specific factors such as basis and open interest. Financialization of commodity markets, via significant and increasing co-variation of extreme spot price innovations with US equity market and trade-weighted US dollar returns, appears to be a major driver of extreme events in the 2000-09 period.
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| Date of creation: | 2012 |
| Date of revision: | |
| Handle: | RePEc:oxf:oxcrwp:096 |
| Contact details of provider: | Postal: Web page: http://www.oxcarre.ox.ac.uk/Email: More information through EDIRC
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary Gorton & Fumio Hayashi & K. Rouwenhorst, 2007.
"The Fundamentals of Commodity Futures Returns,"
Yale School of Management Working Papers
amz2605, Yale School of Management, revised 01 Oct 2008.
- Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2013. "The Fundamentals of Commodity Futures Returns," Review of Finance, European Finance Association, vol. 17(1), pages 35-105.
- Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2007. "The Fundamentals of Commodity Futures Returns," NBER Working Papers 13249, National Bureau of Economic Research, Inc.
- Victor Chernozhukov & Ivan Fernandez-Val & Alfred Galichon, 2007.
"Rearranging Edgeworth-Cornish-Fisher expansions,"
CeMMAP working papers
CWP19/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Victor Chernozhukov & Iván Fernández-Val & Alfred Galichon, 2010. "Rearranging Edgeworth–Cornish–Fisher expansions," Economic Theory, Springer, vol. 42(2), pages 419-435, February.
- Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
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