How Do Commodity Futures Respond to Macroeconomic News?

Hess, Dieter; Huang, He; Niessen-Ruenzi, Alexandra

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How Do Commodity Futures Respond to Macroeconomic News?

Financial Markets and Portfolio Management, Vol. 22, No. 2, pp. 127-146, 2008

Posted: 16 Jun 2008

See all articles by Dieter Hess

Dieter Hess

University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)

He Huang

University of Cologne - Faculty of Management, Economics and Social Sciences

Alexandra Niessen-Ruenzi

University of Mannheim, Department of Finance; University of Mannheim - Department of Finance

Abstract

This paper investigates the impact of seventeen US macroeconomic announcements on two broad and representative commodity futures indices. Based on a large sample from 1989 to 2005, we show that the daily price response of the CRB and GSCI commodity futures indices to macroeconomic news is state-dependent. During recessions, news about higher (lower) inflation and real activity lead to positive (negative) adjustments of commodity futures prices. In contrast, we find no significant reactions during economic expansions. We attribute this asymmetric response to the state-dependent interpretation of macroeconomic news. Our findings are robust to several alternative business cycle definitions.

Keywords: Commodities, Macroeconomic announcements, Business cycle

JEL Classification: E44, G14

Suggested Citation: Suggested Citation

Hess, Dieter and Huang, He and Niessen-Ruenzi, Alexandra and Niessen-Ruenzi, Alexandra, How Do Commodity Futures Respond to Macroeconomic News?. Financial Markets and Portfolio Management, Vol. 22, No. 2, pp. 127-146, 2008, Available at SSRN: https://ssrn.com/abstract=1146464