The macroeconomic determinants of commodity futures volatility: Evidence from Chinese and Indian markets

Mo, D, Gupta, R, Li, B and Singh, T 2018, 'The macroeconomic determinants of commodity futures volatility: Evidence from Chinese and Indian markets', Economic Modelling, vol. 70, pp. 543-560.


Document type: Journal Article
Collection: Journal Articles

Title The macroeconomic determinants of commodity futures volatility: Evidence from Chinese and Indian markets
Author(s) Mo, D
Gupta, R
Li, B
Singh, T
Year 2018
Journal name Economic Modelling
Volume number 70
Start page 543
End page 560
Total pages 18
Publisher Elsevier
Abstract We examine the macroeconomic determinants of the volatility of commodity futures (including agricultural commodity futures, metal futures and oil futures) in two emerging commodity markets China and India. The macroeconomic variables used include both domestic and international macroeconomic variables that gauge economic environment, monetary policy and financial market information. We use a recently proposed GARCH-MIDAS model which jointly incorporates the daily price volatility and low-frequency macroeconomic variables. The model decomposes the volatility series into short- and long-run components, thereby enabling us to test whether the macroeconomic variables can determine the long-run variance. We find that there exists a long-run volatility component in the commodity futures, and most of the tested low-frequency macroeconomic variables are positively related to the long-run variance of commodity futures. Our results suggest that both domestic and international macroeconomic information plays an important role in determining the price volatility of the emerging commodity futures.
Subject Finance
Keyword(s) Commodity futures
Emerging markets
GARCH-MIDAS model
Macroeconomic determinants
Volatility
DOI - identifier 10.1016/j.econmod.2017.08.032
Copyright notice © 2017 Elsevier B.V. All rights reserved.
ISSN 0264-9993
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