The influence of uncertainty on commodity futures returns and trading behaviour

Joshua Laubsch, Lee A. Smales, Duc Vo

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

We utilise measures of economic policy uncertainty (EPU) and geopolitical risk (GPR), as well as commitments of traders (COTs), to investigate the influence of uncertainty on commodity markets. We find that uncertainty has a significant influence on returns, but the direction of the response is due to whether uncertainty emanates from demand shocks (EPU) or supply shocks (GPR). Uncertainty is also positively related to volatility and trading volume. Importantly, we also find that the net positions of both commercial and non-commercial traders are influenced by uncertainty levels. Examination of high uncertainty and recessionary periods indicates that our results are state dependent.

Original languageEnglish
Article number101915
Number of pages16
JournalQuarterly Review of Economics and Finance
Volume98
Early online date10 Sept 2024
DOIs
Publication statusPublished - Dec 2024

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