The excess comovement of commodity prices revisited

It is commonly held that commodity prices have a tendency to comove over time due to the effects of microeconomic influences which are common to all commodity prices. In this paper we present a conceptual framework for the identification and testing of the excess comovement hypothesis, i.e. price co...

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Bibliographic Details
Published inWorld development Vol. 22; no. 11; pp. 1747 - 1758
Main Authors Leybourne, S.Y., Lloyd, T.A., Reed, G.V.
Format Journal Article
LanguageEnglish
Published Oxford, Eng Elsevier Ltd 01.11.1994
Elsevier
Pergamon Press
Pergamon Press Inc
SeriesWorld Development
Subjects
Commodities
Commodity
Commodity market
Commodity prices
Comparative analysis
Economic Theory
Economics
Hypotheses
Macroeconomics
Monte Carlo simulation
Movement
Prices
Studies
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Summary:It is commonly held that commodity prices have a tendency to comove over time due to the effects of microeconomic influences which are common to all commodity prices. In this paper we present a conceptual framework for the identification and testing of the excess comovement hypothesis, i.e. price correlation over and above that which can be explained by microeconomic determinants. We find previous approaches to be deficient in important respects and these deficiencies may explain the contrasting results that have been obtained. Our empirical analysis suggests that excess comovement occurs only infrequently in monthly time series. Moreover, the results cast doubt on the existence of commodity price comovement.
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ISSN:0305-750X
1873-5991
DOI:10.1016/0305-750X(94)00081-6