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Co-movements in commodity prices: A note based on network analysis

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  • David Matesanz Gomez
  • Guillermo J. Ortega
  • Benno Torgler
  • German Dabat

Abstract

This paper analyses co-movements in a wide group of commodity prices during the time period 1992-2010. Our methodological approach is based on the correlation matrix and the networks inside. Through this approach we are able to summarize global interaction and interdependence, capturing the existing heterogeneity in the degrees of synchronization between commodity prices. Our results produce two main findings: (a) we do not observe a persistent increase in the degree of co-movement of the commodity prices in our time sample, however from mid-2008 to the end of 2009 co-movements almost doubled when compared with the average correlation; (b) we observe three groups of commodities which have exhibited similar price dynamics (metals, oil and grains and oilseeds) and which have increased their degree of co-movement during the sampled period. These results suggest that speculation and uncertainty are drivers of the sharp slump in commodity prices synchronization.

Suggested Citation

  • David Matesanz Gomez & Guillermo J. Ortega & Benno Torgler & German Dabat, 2011. "Co-movements in commodity prices: A note based on network analysis," CREMA Working Paper Series 2011-21, Center for Research in Economics, Management and the Arts (CREMA).
    • Handle: RePEc:cra:wpaper:2011-21
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    More about this item

    Keywords

    commodity prices; co-movement; hierarchy and topology; networks; complex systems;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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