Abstract

https://ssrn.com/abstract=2011178
 
 

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Correlation in Commodity Futures and Equity Markets Around the World: Long-Run Trend and Short-Run Fluctuation


Xiaoming Li


Massey University - School of Economics and Finance (Albany)

Bing Zhang


Nanjing University - School of Management and Engineering

Zhijie Du


affiliation not provided to SSRN

November 16, 2011


Abstract:     
Addressing the view that recent hikes in the commodity-equity correlation will only be temporary, this paper differentiates itself from previous studies in two aspects: It examines the long-run trends and the short-run fluctuations of the commodity-equity correlation, and it does so to indices from 45 equity markets. Of them, 32 demonstrate an upward long-run trend in their correlations with the commodity futures market throughout the last decade, and 43 have had their correlation trends upswing sharply during the recent financial/economic turmoil. Conditional correlations of 39 equity markets with the commodity futures market move towards or above their long-run trends when volatilities of these equity markets increase. Our results constitute compelling evidence that the attenuating diversification benefits of commodity futures are a long-run and world-wide phenomenon.

Number of Pages in PDF File: 41

Keywords: Commodity futures, Equity, Conditional correlation, Long-run trend

JEL Classification: G01, G11, C22


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Date posted: February 26, 2012  

Suggested Citation

Li, Xiaoming and Zhang, Bing and Du, Zhijie, Correlation in Commodity Futures and Equity Markets Around the World: Long-Run Trend and Short-Run Fluctuation (November 16, 2011). Available at SSRN: https://ssrn.com/abstract=2011178 or http://dx.doi.org/10.2139/ssrn.2011178

Contact Information

Xiaoming Li (Contact Author)
Massey University - School of Economics and Finance (Albany) ( email )
Private Bag 102904
North Shore
Auckland, 0745
New Zealand
+64 9 4140800 ext. 43177 (Phone)
+64 9 441 8177 (Fax)
Bing Zhang
Nanjing University - School of Management and Engineering ( email )
Nanjing, Jiangsu 210093
China
Zhijie Du
affiliation not provided to SSRN ( email )
Feedback to SSRN


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