The Information Content of Commodity Futures Markets

65 Pages Posted: 5 Apr 2019 Last revised: 31 Dec 2019

See all articles by Rómulo Alves

Rómulo Alves

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Marta Szymanowska

Erasmus University Rotterdam (EUR) - Department of Finance; Erasmus Research Institute of Management (ERIM)

Date Written: March 13, 2019

Abstract

We find that commodity futures returns contain information relevant to stock market returns and macroeconomic fundamentals for a large number of countries. Commodity futures returns predict stock market returns in 59 out of 70 countries and macroeconomic fundamentals in 62 countries. This predictability is not concentrated in the energy and industrial metals sectors, as it is economically and statistically significant across all sectors. Surprisingly, we find that the role of countries' dependence on commodity trade is limited in its ability to account for this predictability. This holds true even when considering new measures that take into account indirect exposures through financial and trade linkages between countries. We find much stronger evidence of predictability being related to the ability of commodities to forecast inflation rates. Overall, our evidence is consistent with commodity markets having a truly global information discovery role in relation to financial markets and the real economy.

Keywords: commodity futures markets, time-series predictability, informativeness of prices, macroeconomic fundamentals

JEL Classification: G11, G12, G13

Suggested Citation

Alves, Rómulo and Szymanowska, Marta, The Information Content of Commodity Futures Markets (March 13, 2019). Available at SSRN: https://ssrn.com/abstract=3352822 or http://dx.doi.org/10.2139/ssrn.3352822

Rómulo Alves (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Marta Szymanowska

Erasmus University Rotterdam (EUR) - Department of Finance ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31104089607 (Phone)

HOME PAGE: http://www.rsm.nl/mszymanowska

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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