Work

The Return–Volatility Relation in Commodity Futures Markets

Year: 2015

Type: article

Abstract: 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

Source: Journal of Futures Markets

DOI: 10.1002/fut.21717

Authors: Carl Chiarella, Boda Kang, Christina Sklibosios Nikitopoulos, Thuy‐Duong Tô

Institutions: University of Technology Sydney, University of York, UNSW Sydney

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Australian Research Council

Award: The modelling and estimation of volatility in energy markets