TY - JOUR

T1 - The economic drivers of commodity market volatility

AU - Prokopczuk, Marcel

AU - Stancu, Andrei

AU - Symeonidis, Lazaros

N1 - Funding information: We thank Chris Brooks, Mike Clements, Richard Harris, Peter Moffatt, David Simon, Jean-Guy Simonato, and Chardin Wese Simen for helpful comments on an earlier draft of this paper. We are particularly grateful to Claudio Morana, Bradley Paye, and William Schwert for clarifications on their related research. We also thank the participants in the 23rd Annual Derivatives Securities and Risk Management Conference, the 2013 Financial Management Association European Conference, the 2013 European Financial Management Association Meetings, the 2013 World Finance Conference, the 2013 Financial Management Association Meetings, the 12th Conference on Research on Economic Theory and Econometrics, the 2014 International Association for Applied Econometrics Annual Conference, the 2016 Energy and Commodity Finance Conference, the 2016 World Finance Conference, and the seminar participants at Zeppelin University and at the University of East Anglia for useful comments. Previous versions of this paper were circulated under the title: “On the economic sources of commodity market volatility”.

PY - 2019/11

Y1 - 2019/11

N2 - We analyze the relationship between economic uncertainty and commodity market volatility. We find that commodity market volatility comoves strongly with economic and financial uncertainty, especially during recessions. Variables associated with credit risk, financial market stress, and fluctuations in business conditions bear significant predictive ability for commodity market volatility. The documented predictability is mainly observed in the period after the financialization of commodity markets (i.e. post–2004) and it peaks during the 2008–2009 global financial crisis.

AB - We analyze the relationship between economic uncertainty and commodity market volatility. We find that commodity market volatility comoves strongly with economic and financial uncertainty, especially during recessions. Variables associated with credit risk, financial market stress, and fluctuations in business conditions bear significant predictive ability for commodity market volatility. The documented predictability is mainly observed in the period after the financialization of commodity markets (i.e. post–2004) and it peaks during the 2008–2009 global financial crisis.

KW - Commodities

KW - Crisis

KW - Economic uncertainty

KW - Financialization

KW - Volatility

UR - http://www.scopus.com/inward/record.url?scp=85069586008&partnerID=8YFLogxK

U2 - 10.1016/j.jimonfin.2019.102063

DO - 10.1016/j.jimonfin.2019.102063

M3 - Article

AN - SCOPUS:85069586008

VL - 98

JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

SN - 0261-5606

M1 - 102063

ER -