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The changing relationship between commodity prices and equity prices in commodity exporting

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Abstract

We explore the linkage between equity and commodity markets, focusing in particular on its evolution over time. We document that a country's equity market value has significant out-of-sample predictive ability for the future global commodity price index for several primary commodity-exporting countries. The out-of-sample predictive ability of the equity market appears around 2000s. The results are robust to using several control variables as well as firm-level equity data. Finally, our results indicate that exchange rates are a better predictor of commodity prices than equity markets, especially at very short horizons.

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  • Barbara Rossi, 2012. "The changing relationship between commodity prices and equity prices in commodity exporting," Economics Working Papers 1405, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1405
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    8. Rossi Junior, Jose Luiz & Felicio, Wilson Rafael de Oliveira, 2014. "Common Factors and the Exchange Rate: Results From the Brazilian Case," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 68(1), April.
    9. Lajis, Siti & Masih, Mansur, 2018. "Is the islamic equity market independent of the influence of primary commodities ? Malaysian evidence," MPRA Paper 104766, University Library of Munich, Germany.
    10. Rangga Handika & Rangga Handika & Sigit Triandaru, 2016. "Is the Best Generalized Autoregressive Conditional Heteroskedasticity(p,q) Value-at-risk Estimate also the Best in Reality? An Evidence from Australian Interconnected Power Markets," International Journal of Energy Economics and Policy, Econjournals, vol. 6(4), pages 814-821.
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    14. Rangga Handika & Sania Ashraf, 2018. "Financialized Commodities and Stock Indices Volatilities," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 153-164.
    15. Hardy, Nicolás & Ferreira, Tiago & Quinteros, Maria J. & Magner, Nicolás S., 2023. "“Watch your tone!”: Forecasting mining industry commodity prices with financial report tone," Resources Policy, Elsevier, vol. 86(PA).
    16. Pablo Pincheira-Brown & Nicolás Hardy & Cristobal Henrriquez & Ignacio Tapia & Andrea Bentancor, 2023. "Forecasting Base Metal Prices with an International Stock Index," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(3), pages 277-302, October.
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    18. Rose Mary K. Abraham, 2022. "Financialisation of Commodity Markets: Evidence from India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 16(1), pages 106-131, February.
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    More about this item

    Keywords

    Commodity prices; equity prices; exchange rates; forecasting.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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