Co-Movement between Commodity Market and Equity Market: Does Commodity Market Change?

Yamori, Nobuyoshi

doi:10.4236/me.2011.23036

Cited by 6 publications

(2 citation statements)

References 3 publications

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“…The current literature intimates that the commodity market and equity market dependencies vary over time (Chance 1994). However, studies examining the usefulness of commodities as part of a portfolio comprising traditional financial assets typically make no distinction between short-term and longterm investors in their analyses (see, e.g., Jensen et al (2000Jensen et al ( , 2002, Gorton and Rouwenhorst (2006b), Ibbotson Associates (2006) and Yamori (2011)). Thus the observed time variation of asset dependencies lacks an explicit interpretation from the point of view of investors in different time horizons.…”

Section: Introductionmentioning

confidence: 99%

Short-term and long-term dependencies of the S&P 500 index and commodity prices

Graham¹,

Kiviaho²,

Nikkinen³

2013

Quantitative Finance

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We utilize wavelet coherency methodology with simulated confidence bounds to examine the short-term and long-term dependencies of the returns for S&P 500 and the S&P GSCI ® commodity index. Our results indicate no evidence of co-movement between S&P 500 total return and the S&P GSCI ® commodity index total return in the short term, thereby suggesting diversification gains for equity investors. Importantly, this finding encompasses the onset of the current financial crisis. However, long-term diversification benefits, particularly after the onset of the recent financial crisis, are limited. We find, moreover, no consistent evidence of co-movements between S&P 500 and 10 individual sub-indexes of the S&P GSCI ® commodity index. Of particular importance, we report weak co-movement of returns between S&P 500 and S&P GSCI ® Precious Metals total return and S&P 500 and S&P GSCI ® Softs at all frequencies, implying significant diversification gains both for short-term and long-term investors.

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Section: Introductionmentioning

confidence: 99%

Short-term and long-term dependencies of the S&P 500 index and commodity prices

Graham¹,

Kiviaho²,

Nikkinen³

2013

Quantitative Finance

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“…This article, therefore, suggests that the financial crisis has been transmitted to the commodity segment because of increased cross-linkages between these two markets. Yamori (2011) reports that during the crisis period, equity and commodity returns showed positive correlation, which was not the case in pre-crisis period. As per his results, commodity market is no different from financial markets now, and financialization of commodities is on the rise in the Japanese market; these results make commodity products a redundant tool to diversify the investment portfolio.…”

Section: Literature Reviewmentioning

confidence: 97%

Determinants of the Commodity Futures Market Performance: An Indian Perspective

Dubey

Shankar

2020

South Asia Economic Journal

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This article aims to find out interlinkages between equity and commodity markets through the channel of investors’ outlook in the equity market. The proxies used for gauging perception of investors are investor sentiment index and Advance–Decline ratio. The study also incorporates the introduction of Commodity Transaction Tax (CTT) and occurrence of National Spot Exchange Limited (NSEL) scam in the year 2013. Additionally, returns in commodity market are examined to be a function of equity returns. The empirical findings suggest that the liquidity of commodity futures is inversely related to investor sentiments in equity market, and commodity returns are also negatively related to equity returns. Therefore, equity and commodity markets are inversely related, as liquidity in both the markets reacts to the investor sentiments; contrarily, commodity returns experience a significantly negative impact from equity returns. Additionally, the results also provide evidence that investor sentiment in equity possesses the ability to predict liquidity in the commodity futures market. The study also suggests that the CTT and NSEL scam have significantly and positively affected the liquidity of the Indian commodity market.

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Safe-haven properties of soft commodities during times of Covid-19

Rubbaniy

Khalid

Syriopoulos

et al. 2022

Journal of Commodity Markets

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We use wavelet coherence analysis on global COVID-19 fear index and, soft commodities’ spot and futures prices to investigate safe-haven properties of soft commodities over the period from January 28, 2020 to April 29, 2021. Our findings show that each of the sampled soft commodities shows safe-haven behavior in one of the spot or futures markets and for one of the short-term or long-term investors during the times of COVID-19. Our results also show that safe-haven properties of soft commodities are contingent upon the nature of the commodity. The findings of our mean-variance portfolio analysis indicate that the portfolios with commodity futures are less risky and efficient compared to the portfolio containing stocks only, thus robustly supporting the safe-haven properties of soft commodities during COVID-19. Our results not only have important implications for individual investors and asset managers in suggesting particular soft commodities to strengthen safe-haven and diversification features of their portfolios but also can assist the policy makers to understand and disentangle health fear dimension of several interlocking dynamics affecting the spot and futures prices of soft commodities during COVID-19.

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Co-Movement between Commodity Market and Equity Market: Does Commodity Market Change?

Cited by 6 publications

References 3 publications

Short-term and long-term dependencies of the S&P 500 index and commodity prices

Short-term and long-term dependencies of the S&P 500 index and commodity prices

Determinants of the Commodity Futures Market Performance: An Indian Perspective

Safe-haven properties of soft commodities during times of Covid-19

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