FEEM working papers "Note di lavoro" series
2016 .017

Understanding Dynamic Conditional Correlations between Commodities Futures Markets


Authors: Niaz Bashiri Behmiri, Matteo Manera, Marcella Nicolini
Series: Energy Scenarios and Policy
Editor: Manfred Hafner
Keywords: Multivariate GARCH, Dynamic Conditional Correlations, Future Markets, Commodities
JEL n.: Q42, Q11, C32

Abstract

We estimate dynamic conditional correlations between 10 commodities futures returns in energy, metals and agriculture markets over the period 1998-2014 with a DCC-GARCH model. We look at the factors influencing those correlations, adopting a pooled mean group (PMG) estimator. Macroeconomic variables are significantly correlated with agriculture-energy and metals-energy dynamic conditional correlations; while financial variables are relevant in the agriculture-energy correlations and poorly significant in the metals-energy ones. Speculative activity is generally not statistically significant. Correlations started increasing in the years before the financial crisis and decreased at the end of our period of analysis. 

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Suggested citation: Behmiri, N. B., M. Manera, M. Nicolini, (2016), 'Understanding Dynamic Conditional Correlations between Commodities Futures Markets',  Nota di Lavoro  17.2016, Milan, Italy: Fondazione Eni Enrico Mattei

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