Journal
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
Volume 39, Issue -, Pages 32-44Publisher
ELSEVIER SCIENCE INC
DOI: 10.1016/j.irfa.2015.02.006
Keywords
Herd behavior; Commodity financialization; Return dispersion; Markov switching
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This paper contributes to the debate on commodity financialization by extending tests of herd behavior to commodity futures markets. Utilizing a regime-switching model, we test the presence of herd behavior in a number of commodity sectors including energy, metals, grains and livestock during the low and high market volatility states. We find significant evidence of herd behavior in grains only during the high volatility state. We also find that large price movements in the energy and metal sectors significantly contribute to herd behavior in the market for grains. Finally, we find no significant effect of the stock market on herd behavior in the commodity futures market. Our findings in general do not support the much debated commodity financialization hypothesis. (C) 2015 Elsevier Inc. All rights reserved.
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