Download This PaperFactor Structure in Commodity Futures Return and Volatility
64 Pages Posted: 14 Sep 2014 Last revised: 26 Jun 2017
Date Written: May 8, 2017
Abstract
We uncover stylized facts of commodity futures price and volatility dynamics in the post-financialization period and find a factor structure in daily commodity volatility that is much stronger than the factor structure in returns. The common factor in commodity volatility relates to stock market volatility as well as to the business cycle. Model-free realized commodity betas with the stock market were high during 2008-2010 but have since returned to the pre-crisis level close to zero. We conclude that, while commodity markets appear segmented from the equity market when considering only returns, commodity volatility indicates a nontrivial degree of market integration.
Keywords: Factor structure, financial volatility, beta, high-frequency data, commodities, financialization
JEL Classification: G13, Q02
Suggested Citation: Suggested Citation
Peter Christoffersen (Contact Author)
University of Toronto - Rotman School of Management ( email )
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Toronto, Ontario M5S 3E6 M5P 3C4
Canada
416-946-5511 (Phone)
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