Liquidity Commonality in Commodities
30 Pages Posted: 12 May 2010 Last revised: 27 Jul 2011
Date Written: July 27, 2011
We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997 - 2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We also find some evidence that changes in stock market liquidity positively influence changes in individual commodity liquidity.
Keywords: Commodity, Liquidity, Commonality
JEL Classification: G11, G12, G13
Suggested Citation: Suggested Citation