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Fractional Integration in Commodity Futures Returns

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  • John Elder
  • Hyun J. Jin

Abstract

We reexamine commodity futures returns for evidence of fractional integration utilizing two estimators based on wavelets. We summarize basic wavelet methods for signal processing and decompose commodity futures returns by wavelet scale. We find the evidence for long memory is not conclusive based on visual inspection of the wavelet decomposition, but formal statistical tests suggest evidence of long memory, in the form of antipersistence, in about half of agricultural commodity futures. We find little evidence of long memory in metal futures. Our results are useful in interpreting previous disparate findings based on frequency domain estimators.

Suggested Citation

  • John Elder & Hyun J. Jin, 2009. "Fractional Integration in Commodity Futures Returns," The Financial Review, Eastern Finance Association, vol. 44(4), pages 583-602, November.
    • Handle: RePEc:bla:finrev:v:44:y:2009:i:4:p:583-602
    DOI: 10.1111/j.1540-6288.2009.00231.x
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    Cited by:

    1. Sanjay Rajagopal, 2012. "A Study of the Returns Behavior of Small Capitalization REITs," Journal of Economics and Behavioral Studies, AMH International, vol. 4(8), pages 457-466.
    2. Karali, Berna & Power, Gabriel J., 2010. "Is commodity price volatility persistent? Another look using improved, full-sample estimates," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61826, Agricultural and Applied Economics Association.
    3. Lazzarino, Marco & Berrill, Jenny & Šević, Aleksandar, 2022. "The importance of distinguishing between precious and industrial metals when investing in mining stocks," Resources Policy, Elsevier, vol. 78(C).
    4. Hooi Hooi Lean & Russell Smyth, 2015. "Testing for weak-form efficiency of crude palm oil spot and future markets: new evidence from a GARCH unit root test with multiple structural breaks," Applied Economics, Taylor & Francis Journals, vol. 47(16), pages 1710-1721, April.
    5. Liesivaara, Petri & Myyrä, Sami, 2016. "Income stabilisation tool and the pig gross margin index for the Finnish pig sector," 90th Annual Conference, April 4-6, 2016, Warwick University, Coventry, UK 236360, Agricultural Economics Society.
    6. John Elder & Sriram Villupuram, 2012. "Persistence in the return and volatility of home price indices," Applied Financial Economics, Taylor & Francis Journals, vol. 22(22), pages 1855-1868, November.
    7. Jean-Christophe Statnik & David Verstraete, 2015. "Price dynamics in agricultural commodity markets: a comparison of European and US markets," Empirical Economics, Springer, vol. 48(3), pages 1103-1117, May.

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