The relationship between commodity markets and commodity mutual funds: a wavelet-based analysis

Nikolaos Antonakakis, Tsangyao Chang, Juncal Cunado, Rangan Gupta

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    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 languageEnglish
    JournalFinance Research Letters
    Early online date5 Apr 2017
    DOIs
    Publication statusEarly online - 5 Apr 2017

    Keywords

    • commodity returns and flows
    • Granger causality
    • nonlinearity
    • time and frequency domains
    • wavelet

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