A0738
Title: Commodities common factor: An empirical assessment of the markets drivers
Authors: Johannes Luebbers - TU Dortmund (Germany) [presenting]
Peter N Posch - TU Dortmund (Germany)
Abstract: Applying a generalized dynamic factor model to the energy and raw material market a latent common factor in commodity futures returns is identified. This factor is driven by five market shocks and accounts for a major part of the total return variation. Before the global financial crisis the authors find commodity futures returns to be significantly exposed to an agricultural specific component and to an energy specific component afterwards which emphasizing the rising importance of the energy sector. This provides an indication of how a global change in the energy market affects the co-movement of commodities. The findings suggest to considering commodities as a heterogeneous asset class which is exposed to fundamental driving forces.
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