Macro News and Commodity Returns

21 Pages Posted: 24 Sep 2015

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University - Centre for Empirical Finance

Fabio Spagnolo

Brunel University London - Economics and Finance

Nicola Spagnolo

Brunel University

Multiple version iconThere are 2 versions of this paper

Date Written: September 2015

Abstract

This paper adopts a VAR-GARCH approach to model the dynamic linkages between both the mean and the variance of macro news and commodity returns (Gold, Corn, Wheat, Soybeans, Silver, Platinum, Palladium, Copper, Aluminium and Crude Oil) over the period 01/01/2001-26/09/2014. The chosen specification also controls for the effect of the exchange rate. The results can be summarised as follows. Mean spillovers running from news to commodity returns are positive with the exception of Gold and Silver. Volatility spillovers are bigger in size and affect most commodity returns. Both first and second moment linkages are stronger in the post-September 2008 period. Overall, our findings confirm that commodities, despite not being financial assets, are sensitive to macro news (especially their volatility), and also suggest that the global financial crisis has strengthened such linkages.

Keywords: Macro news, Commodity Prices, VAR-GARCH model

JEL Classification: C32, F36, G15

Suggested Citation

Caporale, Guglielmo Maria and Spagnolo, Fabio and Spagnolo, Nicola, Macro News and Commodity Returns (September 2015). DIW Berlin Discussion Paper No. 1508. Available at SSRN: https://ssrn.com/abstract=2664532 or http://dx.doi.org/10.2139/ssrn.2664532

Guglielmo Maria Caporale (Contact Author)

Brunel University - Centre for Empirical Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Fabio Spagnolo

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom
+44 1895 816383 (Phone)
+44 1895 203303 (Fax)

HOME PAGE: http://www.brunel.ac.uk/depts/ecf/Staff/SpagnoloF/Main.htm

Nicola Spagnolo

Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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