47 Pages Posted: 11 Dec 2007 Last revised: 12 Nov 2009
Date Written: July 11, 2008
Amidst a sharp rise in commodity investing, many have asked whether commodities nowadays move in sync with traditional financial assets. Using daily, weekly and monthly data, we provide evidence that challenges this idea. Applying dynamic correlation and recursive cointegration techniques, we find that the relation between the returns on investable commodity and U.S. equity indices did not change significantly from January 1991 to May 2008. Importantly, we provide the first analysis of co-movement during periods of extreme returns. Again, we find no evidence of a secular increase in co-movement between the returns on commodity and equity investments during extreme events.
Keywords: Commodities, Equities, Dynamic conditional correlations, DCC, Cointegration, Extreme-events correlations
JEL Classification: G10, G13, L89
Suggested Citation: Suggested Citation
Buyuksahin, Bahattin and Haigh, Michael S. and Robe, Michel A., Commodities and Equities: 'A Market of One'? (July 11, 2008). Available at SSRN: https://ssrn.com/abstract=1069862 or http://dx.doi.org/10.2139/ssrn.1069862
By Meb Faber