The Dynamics of Commodity Return Comovements

Journal of Futures Markets, Forthcoming (2021)

58 Pages Posted: 8 May 2020 Last revised: 30 Apr 2021

See all articles by Marcel Prokopczuk

Marcel Prokopczuk

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

Chardin Wese Simen

University of Liverpool Management School

Robert Wichmann

ICMA Centre, University of Reading

Date Written: April 14, 2020

Abstract

We compare factor models with respect to their ability to explain commodity futures return
comovements. A simple one-factor model based on the rst principal component extracted
from a panel of commodity returns outperforms a macroeconomic model, and explains most
of the realized comovements. We nd that intersectoral correlations display more time
variations than intrasectoral correlations. Dissecting the evidence further, we nd that co-
movements are driven by the variation of the factor as opposed to exposure to it. Our results
cast doubt on the persistence of the e ects of nancialization and emphasize the importance
of the dynamics of the factor variance.

Keywords: Commodity Markets, Comovement, Financialization, Factor Model

JEL Classification: G13, C38, F36, Q02

Suggested Citation

Prokopczuk, Marcel and Prokopczuk, Marcel and Wese Simen, Chardin and Wichmann, Robert, The Dynamics of Commodity Return Comovements (April 14, 2020). Journal of Futures Markets, Forthcoming (2021), Available at SSRN: https://ssrn.com/abstract=3575460 or http://dx.doi.org/10.2139/ssrn.3575460

Marcel Prokopczuk (Contact Author)

University of Reading - ICMA Centre ( email )

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

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

Koenigsworther Platz 1
Hannover, 30167
Germany

Chardin Wese Simen

University of Liverpool Management School ( email )

Management School
University of Liverpool
Liverpool, L69 7ZH
United Kingdom

Robert Wichmann

ICMA Centre, University of Reading ( email )

ICMA Centre, Whiteknights Campus
Shinfield Road
Reading, Berkshire RG6 6BA
United Kingdom
+44 118 378 8239 (Phone)

HOME PAGE: http://www.icmacentre.ac.uk

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
98
Abstract Views
473
rank
333,728
PlumX Metrics