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Comovement between commodity sectors

Author

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  • Cai, Guixin
  • Zhang, Hao
  • Chen, Ziyue

Abstract

We aim to document the comovement between commodity sectors by using the three-dimensional continuous wavelet transform and copula method with the weekly dataset from January 1991 to December 2018. The dependence between commodity sectors varies across time and frequency. Precisely, Agriculture–Energy pair, Agriculture–Industrial metals pair, Energy–Industrial metals and Industrial metals–Precious metals pair show quite similar pattern in the lead–lag relationship and the degree of comovement is quite strong. In addition, Energy–Livestock pair, Energy–Precious metals pair and Industrial–Livestock pair do not show obvious periodic characteristics, however, they present strong comovement in the long term. Furthermore, we find the evidence of the robust strong relationship in the Agriculture–Industrial metals pair and Industrial metals–Precious metals pair. Investors who aim to make good portfolio management and policymakers who want to make effective macroeconomic policy should take these conclusions into account.

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  • Cai, Guixin & Zhang, Hao & Chen, Ziyue, 2019. "Comovement between commodity sectors," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 1247-1258.
    • Handle: RePEc:eee:phsmap:v:525:y:2019:i:c:p:1247-1258
    DOI: 10.1016/j.physa.2019.04.116
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    More about this item

    Keywords

    Commodity; Comovement; Wavelet; Copula;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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