Predictability in commodity markets: evidence from more than a century

Hollstein, F., Prokopczuk, M., Tharann, B. and Wese Simen, C. (2021) Predictability in commodity markets: evidence from more than a century. Journal of Commodity Markets, 24. 100171. ISSN 2405-8513 doi: 10.1016/j.jcomm.2021.100171

Abstract/Summary

Using more than 140 years of data, we comprehensively analyze the predictive power of a broad set of business cycle variables for risk and return in commodity spot markets. We find that industrial production growth and inflation are the strongest predictors for future commodity returns. Several further variables help predict future commodity volatilities. The introduction of derivatives generally reduces the predictability in the most active commodity markets but increases the predictability in others. Thus, derivatives likely make markets more efficient, but also attract most of the price discovery activity. Commodity spot volatilities generally rise after futures introduction.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/95509
Identification Number/DOI	10.1016/j.jcomm.2021.100171
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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