Asymmetric Volatility in Commodity Markets

Research output: Contribution to conferencePaper

Abstract

The paper studies the return-volatility relationship in a range of commodities. We develop a commodity price model and show that the volatility of price changes can be positively or negatively related to demand shocks. An “inverse leverage effect” – the volatility is higher following positive price shocks – is found in more than half of the daily spot prices. The effect is weaker in 3-month futures market and monthly historical volatility measures. Only crude oil exhibits a “leverage effect” – a higher volatility follows a negative shock, and the reason is explored in the context of its special market structure.

Original languageEnglish
Publication statusPublished - 29 May 2019
Event42nd IAEE International Conference: Local Energy, Global Markets - Montreal, Canada
Duration: 29 May 20191 Jun 2019
Conference number: 42
https://iaee2019.org/

Conference

Conference42nd IAEE International Conference
CountryCanada
CityMontreal
Period29/05/191/06/19
Internet address

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Keywords

  • asymmetric volatility
  • commodity markets
  • invetory effects
  • OPEC
  • crude oil
  • GARCH

Cite this

Chen, Y-F., & Mu, X. (2019). Asymmetric Volatility in Commodity Markets. Paper presented at 42nd IAEE International Conference, Montreal, Canada.