The Economic Drivers of Commodity Market Volatility

66 Pages Posted: 11 Jul 2019

See all articles by Marcel Prokopczuk

Marcel Prokopczuk

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Andrei Stancu

University of East Anglia (UEA) - Norwich Business School

Lazaros Symeonidis

Essex Business School, University of Essex

Date Written: July 10, 2019

Abstract

We analyze the relationship between economic uncertainty and commodity market volatility. We find that commodity market volatility comoves strongly with economic and financial uncertainty, especially during recessions. Variables associated with credit risk, financial market stress, and fluctuations in business conditions bear significant predictive ability for commodity market volatility. The documented predictability is mainly observed in the period after the financialization of commodity markets (i.e. post-2004) and it peaks around the 2008-2009 global financial crisis.

Keywords: Commodities, Economic Uncertainty, Volatility, Financialization, Crisis

JEL Classification: G12, G13

Suggested Citation

Prokopczuk, Marcel and Stancu, Andrei and Symeonidis, Lazaros, The Economic Drivers of Commodity Market Volatility (July 10, 2019). Journal of International Money and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3417702

Marcel Prokopczuk

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Andrei Stancu

University of East Anglia (UEA) - Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

Lazaros Symeonidis (Contact Author)

Essex Business School, University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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