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Title: On the economic determinants of commodity returns and their volatility
Author: Symeonidis, Lazaros
Awarding Body: University of Reading
Current Institution: University of Reading
Date of Award: 2013
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The present thesis deals with the economic determinants of commodity returns and their volatility. In the first essay of the thesis we empirically investigate the main predictions of the theory of storage regarding the impact of inventory on commodity returns and their volatility. Using a large cross-section of physical inventory data on 21 commodities, we find that inventory exhibits a strongly significant positive relationship with the adjusted futures basis. Second, price volatility is a decreasing function of inventory for the majority of commodities in our sample. This effect appears to be much more pronounced when the futures market is in backwardation (low inventory states). In the second essay, we study the links between economic uncertainty and commodity futures return volatility. Analyzing volatility for the aggregate commodity market and for various commodity portfolios we find that the volatility of several macroeconomic and financial variables explains the variation in commodity returns. Furthermore, based on the information contained in a unique dataset of forecasts made by professional economists, we construct forward looking economic uncertainty proxies that do not suffer from the known problems of historical macroeconomic data (e.g., data revisions and publication lags). These empirical proxies provide stronger evidence that fluctuations in the level of macroeconomic activity drive the volatility of commodity futures returns.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available