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Returns in commodities futures markets and financial speculation: a multivariate GARCH approach

Author

Listed:
  • Matteo Manera

    () (Department of Statistics, University of Milan-Bicocca and Fondazione Eni Enrico Mattei, Milan)

  • Marcella Nicolini

    () (Department of Economics and Business, University of Pavia and Fondazione Eni Enrico Mattei, Milan)

  • Ilaria Vignati

    () (Fondazione Eni Enrico Mattei, Milan)

Abstract

This paper analyses futures prices for four energy commodities (light sweet crude oil, heating oil, gasoline and natural gas) and five agricultural commodities (corn, oats, soybean oil, soybeans and wheat), over the period 1986-2010. Using CCC and DCC multivariate GARCH models, we find that financial speculation is poorly significant in modelling returns in commodities futures while macroeconomic factors help explaining returns in commodities futures. Moreover, spillovers between commodities are present and the conditional correlations among commodities are high and time-varying.

Suggested Citation

  • Matteo Manera & Marcella Nicolini & Ilaria Vignati, 2012. "Returns in commodities futures markets and financial speculation: a multivariate GARCH approach," Quaderni di Dipartimento 170, University of Pavia, Department of Economics and Quantitative Methods.
  • Handle: RePEc:pav:wpaper:170
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    References listed on IDEAS

    as
    1. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425.
    2. Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2010. "Analyzing and forecasting volatility spillovers, asymmetries and hedging in major oil markets," Energy Economics, Elsevier, vol. 32(6), pages 1445-1455, November.
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    19. Kaufmann, Robert K., 2011. "The role of market fundamentals and speculation in recent price changes for crude oil," Energy Policy, Elsevier, vol. 39(1), pages 105-115, January.
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    Citations

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    Cited by:

    1. Tanattrin Bunnag, 2015. "Volatility Transmission in Oil Futures Markets and Carbon Emissions Futures," International Journal of Energy Economics and Policy, Econjournals, vol. 5(3), pages 647-659.
    2. Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Yoon, Seong-Min, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 225-243.
    3. Creti, Anna & Joëts, Marc & Mignon, Valérie, 2013. "On the links between stock and commodity markets' volatility," Energy Economics, Elsevier, vol. 37(C), pages 16-28.
    4. repec:dau:papers:123456789/14980 is not listed on IDEAS
    5. Morana, Claudio, 2013. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 206-226.
    6. Will, Matthias Georg & Prehn, Sören & Pies, Ingo & Glauben, Thomas, 2012. "Schadet oder nützt die Finanzspekulation mit Agrarrohstoffen? Ein Literaturüberblick zum aktuellen Stand der empirischen Forschung," Discussion Papers 2012-26, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    7. Khan, Aftab & Masih, Mansur, 2014. "Correlation between Islamic stock and Commodity markets: An investigation into the impact of financial crisis and financialization of commodity markets," MPRA Paper 56979, University Library of Munich, Germany.

    More about this item

    Keywords

    Energy; Commodities; Futures markets; Financial speculation; Multivariate GARCH;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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