The Return–Volatility Relation in Commodity Futures Markets

Carl Chiarella; Boda Kang; Christina Sklibosios Nikitopoulos; Thuy-Duong Tô

doi:10.1002/fut.21717

The Return–Volatility Relation in Commodity Futures Markets

Carl Chiarella, Boda Kang, Christina Sklibosios Nikitopoulos, Thuy-Duong Tô

Mathematics

Research output: Contribution to journal › Article › peer-review

Abstract

By employing a continuous time multi-factor stochastic volatility model, the dynamic relation between returns and volatility in the commodity futures markets is analyzed. The model is estimated by using an extensive database of gold and crude oil futures and futures options. A positive relation in the gold futures market and a negative relation in the crude oil futures market subsist, especially over periods of high volatility principally driven by market-wide shocks. The opposite relation holds over quiet periods typically driven by commodity-specific effects. According to the proposed convenience yield effect, normal (inverted) commodity futures markets entail a negative (positive) relation.

Original language	English
Pages (from-to)	127-152
Number of pages	26
Journal	The Journal of Futures Markets
Volume	36
Issue number	2
Early online date	12 Mar 2015
DOIs	https://doi.org/10.1002/fut.21717
Publication status	Published - 5 Jan 2016

Bibliographical note

© 2015, Wiley.This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details

Access to Document

10.1002/fut.21717

JFM Accepted Version
© 2015, Wiley.This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details
Accepted author manuscript, 3.67 MB

Cite this

@article{8e1a714604e44e5a953d1e495562823b,

title = "The Return–Volatility Relation in Commodity Futures Markets",

abstract = "By employing a continuous time multi-factor stochastic volatility model, the dynamic relation between returns and volatility in the commodity futures markets is analyzed. The model is estimated by using an extensive database of gold and crude oil futures and futures options. A positive relation in the gold futures market and a negative relation in the crude oil futures market subsist, especially over periods of high volatility principally driven by market-wide shocks. The opposite relation holds over quiet periods typically driven by commodity-specific effects. According to the proposed convenience yield effect, normal (inverted) commodity futures markets entail a negative (positive) relation.",

author = "Carl Chiarella and Boda Kang and Nikitopoulos, {Christina Sklibosios} and Thuy-Duong T{\^o}",

note = "{\textcopyright} 2015, Wiley.This is an author-produced version of the published paper. Uploaded in accordance with the publisher{\textquoteright}s self-archiving policy. Further copying may not be permitted; contact the publisher for details ",

year = "2016",

month = jan,

day = "5",

doi = "10.1002/fut.21717",

language = "English",

volume = "36",

pages = "127--152",

journal = "The Journal of Futures Markets",

issn = "1096-9934",

publisher = "Wiley-Blackwell",

number = "2",

}

TY - JOUR

T1 - The Return–Volatility Relation in Commodity Futures Markets

AU - Chiarella, Carl

AU - Kang, Boda

AU - Nikitopoulos, Christina Sklibosios

AU - Tô, Thuy-Duong

N1 - © 2015, Wiley.This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details

PY - 2016/1/5

Y1 - 2016/1/5

N2 - By employing a continuous time multi-factor stochastic volatility model, the dynamic relation between returns and volatility in the commodity futures markets is analyzed. The model is estimated by using an extensive database of gold and crude oil futures and futures options. A positive relation in the gold futures market and a negative relation in the crude oil futures market subsist, especially over periods of high volatility principally driven by market-wide shocks. The opposite relation holds over quiet periods typically driven by commodity-specific effects. According to the proposed convenience yield effect, normal (inverted) commodity futures markets entail a negative (positive) relation.

AB - By employing a continuous time multi-factor stochastic volatility model, the dynamic relation between returns and volatility in the commodity futures markets is analyzed. The model is estimated by using an extensive database of gold and crude oil futures and futures options. A positive relation in the gold futures market and a negative relation in the crude oil futures market subsist, especially over periods of high volatility principally driven by market-wide shocks. The opposite relation holds over quiet periods typically driven by commodity-specific effects. According to the proposed convenience yield effect, normal (inverted) commodity futures markets entail a negative (positive) relation.

U2 - 10.1002/fut.21717

DO - 10.1002/fut.21717

M3 - Article

SN - 1096-9934

VL - 36

SP - 127

EP - 152

JO - The Journal of Futures Markets

JF - The Journal of Futures Markets

IS - 2

ER -