Liquidity commonality in commodities |
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Authors: | Ben R. Marshall Nhut H. Nguyen Nuttawat Visaltanachoti |
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Affiliation: | 1. School of Economics and Finance, Massey University, Private Bag 11-222, Palmerston North, New Zealand;2. Department of Accounting and Finance, University of Auckland, Private Bag 92019, Auckland 1142, New Zealand;3. School of Economics and Finance, Massey University, Private Bag 102-904, Auckland, New Zealand |
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Abstract: | We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997–2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We find no evidence of a consistent link between stock and commodity liquidity in general. Energy commodities appear to provide a better hedge against equity market liquidity risk than the other commodity families. |
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Keywords: | G11 G12 G13 |
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