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The Return–Volatility Relation in Commodity Futures Markets
Author(s) -
Chiarella Carl,
Kang Boda,
Nikitopoulos Christina Sklibosios,
Tô ThuyDuong
Publication year - 2016
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.21717
Subject(s) - futures contract , volatility (finance) , economics , futures market , convenience yield , financial economics , contango , crude oil , commodity , econometrics , relation (database) , commodity market , realized variance , spot contract , finance , engineering , database , computer science , petroleum engineering
By employing a continuous time multi‐factor stochastic volatility model, the dynamic relation between returns and volatility in the commodity futures markets is analyzed. The model is estimated by using an extensive database of gold and crude oil futures and futures options. A positive relation in the gold futures market and a negative relation in the crude oil futures market subsist, especially over periods of high volatility principally driven by market‐wide shocks. The opposite relation holds over quiet periods typically driven by commodity‐specific effects. According to the proposed convenience yield effect, normal (inverted) commodity futures markets entail a negative (positive) relation. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:127–152, 2016