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Uncovering the complex asymmetric relationship between trading activity and commodity futures price: Evidenced from QNARDL study

Author

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  • Sangram Keshari Jena
  • Amine Lahiani

    (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours)

  • Aviral Kumar Tiwari
  • David Roubaud

Abstract

This study cracks the multidimensional asymmetric relationship between trading activity (volume and open interest) and commodity futures prices to analyze the short-term dynamics and long-term cointegrating relationship across different state of the market considering both positive and negative changes in trading activity using a novel Quantile Non-linear Autoregressive Distributed Lag (QNARDL) approach. First, the asymmetric price effect is found in short- and long-run of volume and open interest. Second, the asymmetric price effect due to positive and negative changes in open interest (volume) is found in the short-run (long-run) for copper (gold and crude) futures. Third, distributional asymmetry is found in the above two price effects on all three commodity futures implying that the price effect changes with changes in market conditions such bearish, bullish, and normal. Our findings will help the portfolio managers for effective investment and diversification decision, traders for better trading strategy, hedgers for better risk management strategy, and regulators and concerned exchange for effective policy making in varied market conditions.
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  • Sangram Keshari Jena & Amine Lahiani & Aviral Kumar Tiwari & David Roubaud, 2021. "Uncovering the complex asymmetric relationship between trading activity and commodity futures price: Evidenced from QNARDL study," Post-Print hal-03573202, HAL.
    • Handle: RePEc:hal:journl:hal-03573202
    DOI: 10.1016/j.resourpol.2021.102277
    Note: View the original document on HAL open archive server: https://univ-orleans.hal.science/hal-03573202
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    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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