Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

Borgards, Oliver; Czudaj, Robert; Hoang, Thi Hong Van

doi:10.1016/j.resourpol.2020.101966

Cited by 71 publications

(54 citation statements)

References 94 publications

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“…The important outcome was connected with increasing the magnitude and frequency of price overreactions of agricultural commodities during the Covid-19 pandemic in early 2020. This scenario started to change in March 2020 since agricultural commodities seem to witness the most price overreactions ( Borgards et al, 2021 ). Perhaps this period roughly matches: 1) Spreading Covid-19 worldwide (a global threat outside of China), 2) The beginning of large-scale enforced social distancing in many Western countries (the confirmed cases in Italy, Spain, France and other European countries continued to increase), 3) the full global manifestation of Covid-19 ( Goodell and Goutte, 2021 ).…”

Section: Resultsmentioning

confidence: 99%

“…These results are consistent with recent studies on the influence of the Covid-19 pandemic on agricultural commodities. For instance, Borgards et al (2021) consider the overreaction behavior of 20 commodities futures, focusing on the effect of the Covid-19 pandemic, and find that both the number and the amplitude of overreactions are higher during the Covid-19 pandemic. Adekoya and Oliyide (2020) investigate the impact of the pandemic on the connectedness between commodity and financial markets and unveil that the commodity price spillovers increase dramatically during the first wave of the Covid-19 pandemic in early 2020.…”

Section: Resultsmentioning

confidence: 99%

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Oil prices and agricultural commodity markets: Evidence from pre and during COVID-19 outbreak

Hung

2021

Resources Policy

106

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This paper represents an analysis of the spillover effects and time-frequency connectedness between crude oil prices and agricultural commodity markets using both the spillover index of Diebold and Yilmaz (2012) and the wavelet coherence model to evaluate whether the time-varying return spillover index exhibited the intensity and direction of transmission during the Covid-19 outbreak. Overall, the current results shed light on that in comparison with the pre-Covid-19 period, and the return spillover is more apparent during the Covid-19 crisis. However, levels of the intensity of this relationship vary through the period of research, with several intervals witnessing both negative and positive interactions. Further, our findings indicate significant heterogeneity among agriculture commodity markets in the degree of spillover to crude oil prices over time, amplifying our understanding of the economic channels through which the agriculture commodity markets are correlated. More importantly, there exist significant dependent patterns about the information spillovers across the crude oil and agriculture commodity markets might provide prominent implications for portfolio managers, investors, and government agencies.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

Oil prices and agricultural commodity markets: Evidence from pre and during COVID-19 outbreak

Hung

2021

Resources Policy

106

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“…Our findings are consistent with studies suggesting energy commodity price shows more volatility movement than metal commodity during the COVID-19 pandemic period. For instance, crude oil price shows higher negative than positive overaction during the COVID-19 pandemic period ( Borgards et al, 2021 ).…”

Section: Resultsmentioning

confidence: 99%

COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility

Ahmed

Sarkodıe

2021

Resources Policy

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This paper investigates the switching effect of COVID-19 pandemic and economic policy uncertainty on commodity prices. We employ Markov regime-switching dynamic model to explore price regime dynamics of eight widely traded commodities namely oil, natural gas, corn, soybeans, silver, gold, copper, and steel. We fit two Markov switching regimes to allow parameters to respond to both low and high volatilities. The empirical evidence shows oil, natural gas, corn, soybean, silver, gold, copper, and steel returns adjust to shocks in COVID-19 outcomes and economic policy uncertainty at varying degrees––in both low volatility and high volatility regimes. In contrast, oil and natural gas do not respond to changes in COVID-19 deaths in both regimes. The findings show most commodities are responsive to historical price in terms of demand and supply in both volatility regimes. Our findings further show a high probability that commodity prices will remain in low volatility regime than in high volatility regime––owing to COVID-19-attributed market uncertainties. These findings are useful to both investors and policymakers––as precious metals and agricultural commodities show less negative response to exogenous variables. Thus, investors and portfolio managers could use precious metals, viz. Gold for short-term cover against systematic risks in the market during the period of global pandemic.

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“…In respect of the state of art relative to academic research on diverse financial and economic consequences of the pandemic, including design and implementation of policies facilitating recovery from the Covid-triggered slowdown, it is worth acknowledging that the respective literature has recently grown with a rapid pace ( [13][14][15][16][17][18][19][20]; and references therein). However, a major part of academic publications addressing the reaction of financial markets to the pandemic is mostly focused on the stock market impacts ( [3,5,8,9,21,22]; among others), commodities ( [23][24][25][26][27]; among others), currencies and crypto-currencies [28][29][30][31]. However, it is worth noting that the sovereign and corporate debt markets are barely addressed.…”

Section: Covid-19 Impact On Financial Marketsmentioning

confidence: 99%

The impact of the Covid-19 related media coverage upon the five major developing markets

2021

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This paper analyses the influence of the Covid-19 coverage by the social media upon the shape of the sovereign yield curves of the five major developing countries, namely Federative Republic of B razil, Russian Federation, Republic of India, People’s Republic of China, and the Republic of South Africa (BRICS). The coherenc e between the level, slope, and the curvature of the sovereign yield term structures and the Covid-19 medi a coverage is found to vary between low and high ranges, depending on the phases of the pandemic. The empirical estimations of the yield-curve factors a re performed by means of the Diebold–Li modified version of the Nelson–Siegel model. The intervals of low coherence reveal the capacity of the two latent factors, level and slope, to be used for creating cross-factor diversification strategies, workable under crisis conditions, as evidenced on the example of the ongoing pandemic. Diverse coherence patterns are reported on a per-country basis, highlighting a promising potential of sovereign debt investments for designing cross-country and cross-factor fixed-income strategies, capable of hedging downside risks.

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Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

Cited by 71 publications

References 94 publications

Oil prices and agricultural commodity markets: Evidence from pre and during COVID-19 outbreak

Oil prices and agricultural commodity markets: Evidence from pre and during COVID-19 outbreak

COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility

The impact of the Covid-19 related media coverage upon the five major developing markets

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