Abstract
This paper examines the causal relationship between commodities funds and returns using monthly data for the period May 1997–August 2015. Given the strong evidence of nonlinearity and structural breaks, we use wavelets to analyse causality between the two variables at both time and frequency domains. Wavelet coherency reveals that these two variables are primarily positively related in the short-run and over the period of 2008–2015. When we investigate the phase differences over this period, we observe that returns have predicted flows over the period of 2008–2012, with causality running in the other direction thereafter.
Original language | English |
---|---|
Journal | Finance Research Letters |
Early online date | 5 Apr 2017 |
DOIs | |
Publication status | Early online - 5 Apr 2017 |
Keywords
- commodity returns and flows
- Granger causality
- nonlinearity
- time and frequency domains
- wavelet