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Macro News and Commodity Returns
Author(s) -
Caporale Guglielmo Maria,
Spagnolo Fabio,
Spagnolo Nicola
Publication year - 2017
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1568
Subject(s) - economics , volatility (finance) , vector autoregression , econometrics , autoregressive model , heteroscedasticity , monetary economics , macro , commodity , us dollar , financial crisis , structural vector autoregression , financial economics , exchange rate , macroeconomics , monetary policy , finance , computer science , programming language
This paper adopts a vector autoregression‐generalized autoregressive conditional heteroscedasticity approach to model the dynamic linkages between both mean and variance of macro news and commodity returns (Gold, Corn, Wheat, Soybeans, Silver, Platinum, Palladium, Copper, Aluminium and Crude Oil) over the period 01/01/2001–26/09/2014. The chosen specification also controls for the effect of the exchange rate. The results can be summarized as follows. Mean spillovers running from news to commodity returns are positive with the exception of Gold and Silver. Volatility spillovers are bigger in size and affect most commodity returns. Both first‐moment and second‐moment linkages are stronger in the post‐September 2008 period. Overall, our findings confirm that commodities, despite not being financial assets, are sensitive to macro news (especially their volatility) and also suggest that the global financial crisis has strengthened such linkages. Copyright © 2016 John Wiley & Sons, Ltd.