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The Volatility Behavior and Dependence Structure of Commodity Futures and Stocks
Author(s) -
Gao Lin,
Liu Lu
Publication year - 2014
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21587
Subject(s) - futures contract , volatility (finance) , economics , diversification (marketing strategy) , commodity , financial economics , monetary economics , financialization , commodity market , econometrics , business , finance , marketing
This study finds substantial risk diversification potential between certain commodity groups and stocks by exploring the dependence between their patterns of regime switching. None of the commodity groups share a common volatility regime with stocks, nor are the regime‐switching patterns of grains, industrials, metals, or softs, dependent on that of stocks. Simultaneous volatile regimes of commodity futures and stocks tend to be infrequent and short‐lived. In addition, in spite of financial contagion, animal products, grains, and softs typically demonstrate very low correlations with stocks even in simultaneous volatile regimes. © 2012 Wiley Periodicals, Inc. Jrl Fut Mark 34:93–101, 2014