Details
| Original language | English |
|---|---|
| Pages (from-to) | 1597-1617 |
| Number of pages | 21 |
| Journal | Journal of Futures Markets |
| Volume | 41 |
| Issue number | 10 |
| Early online date | 2 Jun 2021 |
| Publication status | Published - 17 Sept 2021 |
Abstract
We compare factor models with respect to their ability to explain commodity futures return comovements. A simple one-factor model based on the first principal component extracted from a panel of commodity returns outperforms a macroeconomic model, and explains most of the realized comovements. We find that intersectoral correlations display more time variations than intrasectoral correlations. Dissecting the evidence further, we find that comovements are driven by the variation of the factor as opposed to exposure to it. Our results cast doubt on the persistence of the effects of financialization and emphasize the importance of the dynamics of the factor variance.
Keywords
- commodity markets, comovement, factor model, financialization
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Business, Management and Accounting(all)
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of Futures Markets, Vol. 41, No. 10, 17.09.2021, p. 1597-1617.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - The dynamics of commodity return comovements
AU - Prokopczuk, Marcel
AU - Wese Simen, Chardin
AU - Wichmann, Robert
N1 - Funding Information: We are thankful for constructive comments of an anonymous referee, as well as the participants of the Commodity and Energy Markets Annual Meeting at Sapienza University in Rome, the International Finance and Banking Society Conference in Porto, and the Annual Meeting of the German Finance Association in Trier. Contact: prokopczuk@fcm.uni-hannover.de (M. Prokopczuk), c.wese-simen@liverpool.ac.uk (C. Wese Simen), and r.c.wichmann@pgr.icmacentre.ac.uk (R. Wichmann).
PY - 2021/9/17
Y1 - 2021/9/17
N2 - We compare factor models with respect to their ability to explain commodity futures return comovements. A simple one-factor model based on the first principal component extracted from a panel of commodity returns outperforms a macroeconomic model, and explains most of the realized comovements. We find that intersectoral correlations display more time variations than intrasectoral correlations. Dissecting the evidence further, we find that comovements are driven by the variation of the factor as opposed to exposure to it. Our results cast doubt on the persistence of the effects of financialization and emphasize the importance of the dynamics of the factor variance.
AB - We compare factor models with respect to their ability to explain commodity futures return comovements. A simple one-factor model based on the first principal component extracted from a panel of commodity returns outperforms a macroeconomic model, and explains most of the realized comovements. We find that intersectoral correlations display more time variations than intrasectoral correlations. Dissecting the evidence further, we find that comovements are driven by the variation of the factor as opposed to exposure to it. Our results cast doubt on the persistence of the effects of financialization and emphasize the importance of the dynamics of the factor variance.
KW - commodity markets
KW - comovement
KW - factor model
KW - financialization
UR - http://www.scopus.com/inward/record.url?scp=85107373734&partnerID=8YFLogxK
U2 - 10.1002/fut.22222
DO - 10.1002/fut.22222
M3 - Article
AN - SCOPUS:85107373734
VL - 41
SP - 1597
EP - 1617
JO - Journal of Futures Markets
JF - Journal of Futures Markets
SN - 0270-7314
IS - 10
ER -