The Information Content of Commodity Futures Markets
We ﬁnd that commodity futures returns contain information relevant to stock market returns and macroeconomic fundamentals for a large number of countries. Commodity futures returns predict stock market returns in 59 out of 70 countries and macroeconomic fundamentals in 62 countries. This predictability is not concentrated in the Energy and Industrial Metals sectors, as it is economically and statistically signiﬁcant across all sectors. Surprisingly, we ﬁnd that the role of countries’ dependence on commodity trade is limited in its ability to account for this predictability. This holds true even when considering new measures that take into account indirect exposures through ﬁnancial and trade linkages between countries. We ﬁnd much stronger evidence of predictability being related to the ability of commodities to forecast inﬂation rates. Overall, our evidence is consistent with commodity markets having a truly global information discovery role in relation to ﬁnancial markets and the real economy.
|Commodity Futures Markets, Time-Series Predictability, Informativeness of Prices, Macroeconomic Fundamentals|
|Portfolio Choice; Investment Decisions (jel G11), Asset Pricing (jel G12), Contingent Pricing; Futures Pricing (jel G13)|
|Organisation||Rotterdam School of Management (RSM), Erasmus University|
Alves, R, R, & Szymanowska, M.K. (2019). The Information Content of Commodity Futures Markets. Retrieved from http://hdl.handle.net/1765/124489