Common Drivers of Commodity Futures?

Tom Dudda, Tony Klein, Duc Khuong Nguyen, Thomas Walther*

*Corresponding author for this work

Research output: Working paperAcademic

Abstract

We study potential drivers for a large cross-section of commodity futures. Unlike previous studies, we examine the effect of monthly drivers on daily returns using mixed- frequency Granger causality tests. We find real economic activity as a main driver on a monthly basis, whereas financial variables seem to affect returns at daily frequency. The linkages are time-varying for various stages of the financialization of commodity markets with an overall dissipating impact in the recent period of de-financialization. As our results strongly differ from traditional low-frequency Granger causality tests under the temporal aggregation of futures returns, we show the economic value of accessing infor- mation at a higher frequency in an out-of-sample trading study. Our findings emphasize the importance of using mixed-frequency techniques to uncover relationships between monthly-published macroeconomic variables and commodity prices.
Original languageEnglish
PublisherU.S.E. Research Institute
Pages2-61
DOIs
Publication statusPublished - 2022

Publication series

NameU.S.E. Discussion paper series
PublisherUtrecht University
No.07
Volume22
ISSN (Electronic)2666-8238

Keywords

  • Commodity futures
  • VAR
  • Granger causality
  • Mixed data sampling

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