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Analyzing herding behavior in commodities markets – an empirical approach

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  • Júnior, Gerson de Souza Raimundo
  • Palazzi, Rafael Baptista
  • Klotzle, Marcelo Cabus
  • Pinto, Antonio Carlos Figueiredo
Abstract
This study examines beta herding in the commodities market, using the methodology developed by Hwang and Salmon (2004) and a standardized beta adaptation by Hwang, Rubesam, and Salmon (2018) for a state-space model. We analyze the behavior of fifteen commodities between 2000 and 2018 and then extract the food commodities to test their effect separately. The results suggest that betas may deviate from the fundamentals in the two samples. However, food commodity betas tend to revert faster to stability between demand and supply, which results in equilibrium in the long-run risk-return factor.

Suggested Citation

  • Júnior, Gerson de Souza Raimundo & Palazzi, Rafael Baptista & Klotzle, Marcelo Cabus & Pinto, Antonio Carlos Figueiredo, 2020. "Analyzing herding behavior in commodities markets – an empirical approach," Finance Research Letters, Elsevier, vol. 35(C).
    • Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319305094
    DOI: 10.1016/j.frl.2019.08.033
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    References listed on IDEAS

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    Cited by:

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    2. Youtao Xiang & Sumuya Borjigin, 2024. "High–low volatility spillover network between economic policy uncertainty and commodity futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(8), pages 1295-1319, August.
    3. Nicholas Apergis & Chritina Christou & Tasawar Hayat & Tareq Saeed, 2020. "U.S. Monetary Policy and Herding: Evidence from Commodity Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(3), pages 355-374, September.
    4. Wen, Fenghua & Wang, Kangsheng & Zeng, Aiqing, 2024. "Return spillover across the carbon market and financial markets: A quantile-based approach," Research in International Business and Finance, Elsevier, vol. 69(C).
    5. Cao, Yan & Cheng, Sheng & Li, Xinran, 2023. "How economic policy uncertainty affects asymmetric spillovers in food and oil prices: Evidence from wavelet analysis," Resources Policy, Elsevier, vol. 86(PB).
    6. Ren, Yinghua & Tan, Anqi & Zhu, Huiming & Zhao, Wanru, 2022. "Does economic policy uncertainty drive nonlinear risk spillover in the commodity futures market?," International Review of Financial Analysis, Elsevier, vol. 81(C).
    7. Filip, Angela Maria & Pochea, Maria Miruna, 2023. "Intentional and spurious herding behavior: A sentiment driven analysis," Journal of Behavioral and Experimental Finance, Elsevier, vol. 38(C).
    8. Cui, Jinxin & Maghyereh, Aktham, 2023. "Higher-order moment risk connectedness and optimal investment strategies between international oil and commodity futures markets: Insights from the COVID-19 pandemic and Russia-Ukraine conflict," International Review of Financial Analysis, Elsevier, vol. 86(C).
    9. Polat, Onur & Ertuğrul, Hasan Murat & Sakarya, Burçhan & Akgül, Ali, 2024. "TVP-VAR based time and frequency domain food & energy commodities connectedness an analysis for financial/geopolitical turmoil episodes," Applied Energy, Elsevier, vol. 357(C).

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    More about this item

    Keywords

    Beta herding; State-space model; Commodities; Sentiment;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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