Understanding Dynamic Conditional Correlations between Commodities Futures Markets

35 Pages Posted: 8 Mar 2016

See all articles by Niaz Behmiri

Niaz Behmiri

Fondazione Eni Enrico Mattei (FEEM)

Matteo Manera

University of Milan-Bicocca, Italy - Department of Economics, Management and Statistics (DEMS); Fondazione Eni Enrico Mattei (FEEM), Milan, Italy

Marcella Nicolini

University of Pavia - Department of Economics and Management

Date Written: March 8, 2016

Abstract

We estimate dynamic conditional correlations between 10 commodities futures returns in energy, metals and agriculture markets over the period 1998-2014 with a DCC-GARCH model. We look at the factors influencing those correlations, adopting a pooled mean group (PMG) estimator. Macroeconomic variables are significantly correlated with agriculture-energy and metals-energy dynamic conditional correlations; while financial variables are relevant in the agriculture-energy correlations and poorly significant in the metals-energy ones. Speculative activity is generally not statistically significant. Correlations started increasing in the years before the financial crisis and decreased at the end of our period of analysis.

Keywords: Multivariate GARCH, Dynamic Conditional Correlations, Future Markets, Commodities

JEL Classification: Q42, Q11, C32

Suggested Citation

Behmiri, Niaz and Manera, Matteo and Nicolini, Marcella, Understanding Dynamic Conditional Correlations between Commodities Futures Markets (March 8, 2016). FEEM Working Paper No. 017.2016. Available at SSRN: https://ssrn.com/abstract=2744552 or http://dx.doi.org/10.2139/ssrn.2744552

Niaz Behmiri

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

Matteo Manera

University of Milan-Bicocca, Italy - Department of Economics, Management and Statistics (DEMS) ( email )

Via Bicocca degli Arcimboldi, 8
Milan, 20126
Italy
+39 02 6448 5819 (Phone)
+39 02 6448 5878 (Fax)

HOME PAGE: http://www.matteomanera.it

Fondazione Eni Enrico Mattei (FEEM), Milan, Italy ( email )

Corso Magenta, 63
Milan, 20123
Italy
+39 02 520 36944 (Phone)

HOME PAGE: http://www.feem.it

Marcella Nicolini (Contact Author)

University of Pavia - Department of Economics and Management ( email )

Strada Nuova, 65
Pavia, 27100
Italy

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