@article{34fb98522b0c4beb885f925ac2acb11e,
title = "Increasing trends in the excess comovement of commodity prices",
abstract = "We investigate how the excess comovement of commodity prices, that is, the correlation in commodity returns after filtering out common fundamental shocks, has changed over the past three decades by developing the smooth-transition dynamic conditional correlation model that can capture long-run trends and short-run dynamics of correlation simultaneously. Using data from 1983 to 2011, we find that significant increasing long-run trends in excess comovement have appeared since around 2000. We confirm that these increasing trends are neither an artifact of the financial crisis after the bankruptcy of Lehman Brothers in September 2008 nor the time-varying sensitivities of commodity returns to common fundamental shocks. Moreover, we find that no significant increasing trends exist in the excess comovement among off-index commodities and that the surge of global demand alone cannot explain the increasing trends. These findings provide additional evidence for the timing and scope of the recent increasing commodity–return correlations that suggest the influence of the financialization of commodity markets starting around 2000.",
keywords = "Commodity return, DCC, Excess comovement, Financialization, Regime change, Smooth transition, Time-varying correlation",
author = "Kazuhiko Ohashi and Tatsuyoshi Okimoto",
note = "Funding Information: This study is conducted as a part of the Project “Exports and the Japanese Economy: Experiences in the 2000s and the lessons for the future” undertaken at Research Institute of Economy, Trade and Industry (RIETI). We are grateful to the anonymous referees for their helpful suggestions and comments. We are also indebted to Selma Chaker, Mardi Dungey, Evan Gatev, Jim Hamilton, Fumio Hayashi, Toshiki Honda, Akitoshi Ito, Takashi Kanamura, Hidetoshi Nakagawa, Katsushi Nakajima, Nobuhiro Nakamuara, Kiyotaka Satoyoshi, and seminar participants at RIETI, Hitotsubashi University, University of Tokyo, Kobe University, Yokohama National University, Australian National University, Monash University, University of Tasmania, Bank of Japan, Development Bank of Japan, Reserve Bank of New Zealand, International Conference on High-Frequency Data Analysis in Financial Markets, Workshop on Financial Engineering and Financial Econometrics, International Conference on Frontiers in Macroeconometrics, 2013 NFA Annual Meeting, 2014 FMA Asian Conference, 2014 AsianFA Annual Meeting, ESAM/ACE 2014, and Conference on Recent Developments in Financial Econometrics and Applications. The first author thanks the Grant-in-Aid for Scientific Research ((B) 25285097) for the financial support. The second author thanks the financial support by a grant-in-aid from Zengin Foundation for Studies on Economics and Finance . Publisher Copyright: {\textcopyright} 2016 Elsevier Ltd",
year = "2016",
month = mar,
day = "1",
doi = "10.1016/j.jcomm.2016.02.001",
language = "English",
volume = "1",
pages = "48--64",
journal = "Journal of Commodity Markets",
issn = "2405-8513",
publisher = "Elsevier BV",
number = "1",
}