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

See all articles by Bahram Adrangi

Bahram Adrangi

University of Portland - Dr. Robert B. Pamplin, Jr. School of Business Administration

Arjun Chatrath

University of Portland - Dr. Robert B. Pamplin, Jr. School of Business Administration

Rohan A. Christie-David

University of Southern Mississippi - College of Business Administration

Hong Miao

Colorado State University, Fort Collins - Department of Finance & Real Estate

Sanjay Ramchander

Colorado State University, Fort Collins - Department of Finance & Real Estate

Date Written: July 20, 2011

Abstract

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

Adrangi, Bahram and Chatrath, Arjun and Christie-David, Rohan and Miao, Hong and Ramchander, Sanjay, Price Responsiveness and Stock - Flow Distinctions in Commodities (July 20, 2011). Journal of Futures Markets, 35, 2015., Available at SSRN: https://ssrn.com/abstract=1896315 or http://dx.doi.org/10.2139/ssrn.1896315

Bahram Adrangi

University of Portland - Dr. Robert B. Pamplin, Jr. School of Business Administration ( email )

Portland, OR 97203
United States

Arjun Chatrath

University of Portland - Dr. Robert B. Pamplin, Jr. School of Business Administration ( email )

Portland, OR 97203
United States
503-283-7465 (Phone)

Rohan Christie-David

University of Southern Mississippi - College of Business Administration ( email )

Hattiesburg, MS 39406
United States
601-266-6612 (Phone)
601-266-4639 (Fax)

Hong Miao (Contact Author)

Colorado State University, Fort Collins - Department of Finance & Real Estate ( email )

Fort Collins, CO 80523
United States

Sanjay Ramchander

Colorado State University, Fort Collins - Department of Finance & Real Estate ( email )

Fort Collins, CO 80523
United States
970-491-6681 (Phone)

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