Revisiting the excess co-movements of commodity prices in a data-rich environment
Le Pen, Yannick; Sévi, Benoît (2010), Revisiting the excess co-movements of commodity prices in a data-rich environment, 59e Congrès AFSE, 2010-09, Paris (Nanterre), France
TypeCommunication / Conférence
Conference title59e Congrès AFSE
Conference cityParis (Nanterre)
MetadataShow full item record
Abstract (EN)We reinvestigate the issue of excess comovements of commodity prices initially raised in Pindyck and Rotemberg (1990). While Pindyck and Rotemberg and following contributions consider this issue using an arbitrary set of control variables, we develop our analysis using recent development in large approximate factor models so that a richer information set can be considered. This ensures that fundamentals, a necessary concept for any excess comovement analysis, are modelled as well as possible. We then consider different measures of correlation to assess comovement and we provide evidence of excess comovement for a set of 8 seemingly unrelated commodities. Our results indicate that excess comovement in returns does exist even when the issue of heteroscedasticity is considered. We extend our analysis to the excess comovement of volatilities and show that, contrary to the case of returns, comovement vanishes once the effect of fundamentals have been taken out.
Subjects / Keywordsspillover index; heteroscedasticity-corrected correlation; factor models; commodity excess comovement hypothesis
JELE17 - Forecasting and Simulation: Models and Applications
G15 - International Financial Markets
C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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