IDEAS home Printed from https://ideas.repec.org/a/cup/jagaec/v44y2012i03p339-357_00.html
   My bibliography  Save this article

Historical Performance of Commodity and Stock Markets

Author

Listed:
  • Zapata, Hector O.
  • Detre, Joshua D.
  • Hanabuchi, Tatsuya

Abstract

This paper examines two interrelated issues in commodity markets, namely, the cyclical relationship between stocks and commodities and the function of commodity and agribusiness indexes in portfolios. A high negative correlation has existed between stock and commodity prices over the past 140 years. Moreover, the two markets have alternated in price leadership with 29-32-year cycles. The recent price dominance in agricultural commodities started in 2000, a result supported by the empirical results of the portfolio allocation analysis. For a risk-averse investor, irrespective of the period analyzed, placing funds in agribusiness and/or agricultural commodity indexes was sound investing.

Suggested Citation

  • Zapata, Hector O. & Detre, Joshua D. & Hanabuchi, Tatsuya, 2012. "Historical Performance of Commodity and Stock Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 44(3), pages 339-357, August.
    • Handle: RePEc:cup:jagaec:v:44:y:2012:i:03:p:339-357_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1074070800000468/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas W. Hertel & Jayson Beckman, 2011. "Commodity Price Volatility in the Biofuel Era: An Examination of the Linkage between Energy and Agricultural Markets," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 189-221, National Bureau of Economic Research, Inc.
    2. P. B. R. Hazell, 1971. "A Linear Alternative to Quadratic and Semivariance Programming for Farm Planning under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 53(1), pages 53-62.
    3. Adrian Pagan & Don Harding, 2005. "A suggested framework for classifying the modes of cycle research," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 151-159.
    4. Dwight R. Sanders & Scott H. Irwin & Robert P. Merrin, 2010. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 77-94.
    5. Peng, Wei & Bosch, Darrell J., 2001. "Risk and Site Factors Affecting Potential Nitrogen Delivery in the Virginia Coastal Plain," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 33(1), pages 173-188, April.
    6. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    7. Mark L. Teague & Daniel J. Bernardo & Harry P. Mapp, 1995. "Farm-Level Economic Analysis Incorporating Stochastic Environmental Risk Assessment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 8-19.
    8. Andrew Dorward, 2001. "The Effects of Transaction Costs, Power and Risk on Contractual Arrangements: A Conceptual Framework for Quantitative Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(2), pages 59-73, May.
    9. Thomas W. Hertel & Jayson Beckman, 2011. "Commodity Price Volatility in the Biofuel Era: An Examination of the Linkage between Energy and Agricultural Markets," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 189-221, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bharat Kumar Meher & Iqbal Thonse Hawaldar & Santosh Kumar & Abhishek Kumar Gupta, 2022. "Modelling Market Indices, Commodity Market Prices and Stock Prices of Energy Sector using VAR with Variance Decomposition Model," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 122-130, July.
    2. Fujio Toriumi & Kazuki Komura, 2018. "Investment Index Construction from Information Propagation Based on Transfer Entropy," Computational Economics, Springer;Society for Computational Economics, vol. 51(1), pages 159-172, January.
    3. Hanabuchi, Tatsuya, 2013. "Investing in Agribusiness Stocks: What Lies Ahead!," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143041, Southern Agricultural Economics Association.
    4. Brorsen, B. Wade, 2012. "Discussion: Agricultural Commodities and Agribusiness Stocks as Financial Assets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(3), pages 1-3, August.
    5. Ghulam Mujtaba & Asima Siddique & Nader Naifar & Syed Jawad Hussain Shahzad, 2024. "Hedge and safe haven role of commodities for the US and Chinese equity markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2381-2414, April.
    6. Songjiao Chen & William W. Wilson & Ryan Larsen & Bruce Dahl, 2015. "Investing in Agriculture as an Asset Class," Agribusiness, John Wiley & Sons, Ltd., vol. 31(3), pages 353-371, June.
    7. Jasman Tuyon & Zamri Ahmad & Hylmee Matahir, 2016. "The Roles of Investor Sentiment in Malaysian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(Suppl. 1), pages 43-75.
    8. Reboredo, Juan Carlos & Ugolini, Andrea & Hernandez, Jose Arreola, 2021. "Dynamic spillovers and network structure among commodity, currency, and stock markets," Resources Policy, Elsevier, vol. 74(C).
    9. Laila Amir Memdani & Rajya lakshmi Kandukuri, 2014. "Nexus between Returns in Commodity Market and Equity Market: A Case of Indian Steel Industry," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 3(3), pages 59-72, June.
    10. Andriosopoulos, Kostas & Galariotis, Emilios & Spyrou, Spyros, 2017. "Contagion, volatility persistence and volatility spill-overs: The case of energy markets during the European financial crisis," Energy Economics, Elsevier, vol. 66(C), pages 217-227.
    11. Hector O. Zapata & Junior E. Betanco & Maria Bampasidou & Michael Deliberto, 2023. "A Cyclical Phenomenon among Stock & Commodity Markets," JRFM, MDPI, vol. 16(7), pages 1-13, July.
    12. Valdes, Rodrigo, 2017. "What drives the regional integration of agribusiness stocks? Evidence in worldwide perspective," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258265, Agricultural and Applied Economics Association.
    13. Luo Wang & Bin Li & Rakesh Gupta & Jen-Je Su & Benjamin Liu, 2017. "Return Predictability in Australian Managed Funds," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 16(1), pages 1-19, June.
    14. Wang, Qiao & Balvers, Ronald, 2021. "Determinants and predictability of commodity producer returns," Journal of Banking & Finance, Elsevier, vol. 133(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:use:tkiwps:11 is not listed on IDEAS
    2. Natanelov, Valeri & Alam, Mohammad J. & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2011. "Is there co-movement of agricultural commodities futures prices and crude oil?," Energy Policy, Elsevier, vol. 39(9), pages 4971-4984, September.
    3. Castiblanco, Carmenza & Moreno, Alvaro & Etter, Andrés, 2015. "Impact of policies and subsidies in agribusiness: The case of oil palm and biofuels in Colombia," Energy Economics, Elsevier, vol. 49(C), pages 676-686.
    4. Leucci, A. C. & Ghinoi, S. & Sgargi, D. & Wesz, V. J., Jr., 2013. "Variation and links among food and energy international prices. An analysis through VAR models from 2000 to 2012," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149923, Italian Association of Agricultural and Applied Economics (AIEAA).
    5. Uria-Martinez, Rocio & Leiby, Paul, 2012. "Advanced Biofuels System Configuration In The U.S.: Cost And Performance Tradeoffs," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125005, Agricultural and Applied Economics Association.
    6. Swinton, Scott M. & Black, J. Roy, 2000. "Modeling Of Agricultural Systems," Staff Paper Series 11581, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    7. Turvey, Calum G. & Driver, H.C., 1985. "An Examination of Systematic Risks in Agriculture: A Farm Sector Capital Asset Pricing Model," 1985 Annual Meeting, August 4-7, Ames, Iowa 278553, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Xiarchos, Irene M. & Burnett, J. Wesley & Kucher, Oleg, 2012. "Energy and Speculation: New Dynamics in Agricultural Commodity Price Volatility," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124788, Agricultural and Applied Economics Association.
    9. Chen, Kuan-Ju & Chen, Kuan-Heng, 2016. "Analysis of Energy and Agricultural Commodity Markets with the Policy Mandated: A Vine Copula-based ARMA-EGARCH Model," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236028, Agricultural and Applied Economics Association.
    10. Marius Rădulescu & Constanta Rădulescu & Gheorghiţă Zbăganu, 2014. "A portfolio theory approach to crop planning under environmental constraints," Annals of Operations Research, Springer, vol. 219(1), pages 243-264, August.
    11. Andrés Weintraub & Carlos Romero, 2006. "Operations Research Models and the Management of Agricultural and Forestry Resources: A Review and Comparison," Interfaces, INFORMS, vol. 36(5), pages 446-457, October.
    12. Wixson, Sarah E. & Katchova, Ani L., 2012. "Price Asymmetric Relationships in Commodity and Energy Markets," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122553, European Association of Agricultural Economists.
    13. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    14. Ho, Ron Yiu-wah & Strange, Roger & Piesse, Jenifer, 2006. "On the conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(3), pages 199-214, July.
    15. Muhammad Kashif & Thomas Leirvik, 2022. "The MAX Effect in an Oil Exporting Country: The Case of Norway," JRFM, MDPI, vol. 15(4), pages 1-16, March.
    16. Michel Fliess & Cédric Join, 2009. "Systematic risk analysis: first steps towards a new definition of beta," Post-Print inria-00425077, HAL.
    17. Barbara Fidanza & Ottorino Morresi, 2021. "Size and Value Anomalies in European Bank Stocks," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(12), pages 227-227, July.
    18. Bo-Hung Chiou & Shen-Ho Chang, 2020. "Influence of Investment Efficiency by Managers and Accounting Conservatism on Idiosyncratic Risks to Investors," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(1), pages 1-8.
    19. Constantinos Antoniou & John A. Doukas & Avanidhar Subrahmanyam, 2016. "Investor Sentiment, Beta, and the Cost of Equity Capital," Management Science, INFORMS, vol. 62(2), pages 347-367, February.
    20. Radosław Kurach, 2013. "Does Beta Explain Global Equity Market Volatility – Some Empirical Evidence," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 7(2), June.
    21. Zabolotnyy, Serihiy & Wasilewski, Mirosław, 2018. "Operating and financial leverage as risk measures in agricultural companies," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 276377, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jagaec:v:44:y:2012:i:03:p:339-357_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/aae .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.