Price Responsiveness and Stock - Flow Distinctions in Commodities
Journal of Futures Markets, 35, 2015.
43 Pages Posted: 27 Jul 2011 Last revised: 10 Feb 2018
Date Written: July 20, 2011
To establish stock-versus-flow orientations of a commodity, the mediating role of inventories in price formation is considered. This framework is tested by examining responses of COMEX gold, silver, and copper to macroeconomic news releases. Standard responsiveness-tests, which ignore the role of inventories, show gold and silver (our ex-ante stock-oriented commodities), exhibiting weak stock-orientation, while copper exhibits a flow-orientation. However, when the role of inventories is considered, the stock-orientation of gold and silver becomes readily apparent. Additionally, copper exhibits sporadic stock-orientation. Our findings which demonstrate the importance of recognizing these distinctions also have useful implications for market regulation.
Keywords: Stock-Flow, Macroeconomic News, Metal Futures
JEL Classification: D40, D43, D84, Q31
Suggested Citation: Suggested Citation