Commodities and Equities: 'A Market of One'?

47 Pages Posted: 11 Dec 2007 Last revised: 12 Nov 2009

Bahattin Buyuksahin

Bank of Canada

Michael S. Haigh

Standard Chartered Bank

Michel A. Robe

American University - Kogod School of Business

Date Written: July 11, 2008

Abstract

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

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

Bahattin Buyuksahin

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Michael Stephen Haigh

Standard Chartered Bank ( email )

6 Battery Rd
049909
Singapore
65-8838-7318 (Phone)

Michel A. Robe (Contact Author)

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1880 (Phone)
202-885-1946 (Fax)

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