Macro News and Commodity Returns

20 Pages Posted: 5 Nov 2015

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Fabio Spagnolo

Brunel University London - Economics and Finance

Nicola Spagnolo

Brunel University London - Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 13, 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: C320, F360, G150

Suggested Citation

Caporale, Guglielmo Maria and Spagnolo, Fabio and Spagnolo, Nicola, Macro News and Commodity Returns (October 13, 2015). CESifo Working Paper Series No. 5551. Available at SSRN: https://ssrn.com/abstract=2686554

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)

HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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 London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

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