The Myth of Co-Moving Commodity Prices

McDermott, C. John; Cashin, Paul Anthony; Scott, Alasdair M.

doi:10.2139/ssrn.321381

The Myth of Co-Moving Commodity Prices

Bank of New Zealand Discussion Paper No. G99/9

19 Pages Posted: 10 Nov 2003

See all articles by C. John McDermott

Alasdair M. Scott

International Monetary Fund (IMF)

Date Written: 1999

Abstract

There is a common perception that the prices of unrelated commodities move together. This paper re-examines this notion, using a measure of co-movement of economic time series called concordance. Concordance measures the proportion of time that the prices of two commodities are concurrently in the same boom period or same slump period. Using data on the prices of several unrelated commodities, the paper finds no evidence of co-movement in commodity prices. The results carry an important policy implication, as the study provides no support for earlier claims of irrational trading behaviour by participants in world commodity markets.

JEL Classification: E32, Q11, O13

Suggested Citation: Suggested Citation

McDermott, C. John and Cashin, Paul Anthony and Scott, Alasdair M., The Myth of Co-Moving Commodity Prices (1999). Bank of New Zealand Discussion Paper No. G99/9, Available at SSRN: https://ssrn.com/abstract=321381 or http://dx.doi.org/10.2139/ssrn.321381