Do financial stress and policy uncertainty have an impact on the energy and metals markets? A quantile regression approach

• Published in: International review of economics & finance Vol. 43; pp. 284 - 298
• Main Authors: Reboredo, Juan C., Uddin, Gazi Salah
• Format: Journal Article
• Language: English
• Published: Greenwich Elsevier Inc 01-05-2016; Elsevier Science Ltd
• Subjects: Causality; Commodities; Commodity futures; Commodity prices; Financial uncertainty; Futures; Interest rates; International finance; Policy uncertainty; Prices; Quantile regression; Rates of return; Securities markets; Studies; United States > US; C31; Policy uncertainty; C58; G13; G23; Financial uncertainty; Quantile regression; Commodity prices
• ISSN: 1059-0560; 1873-8036; 1873-8036
• DOI: 10.1016/j.iref.2015.10.043

This paper examines the impact of financial stress and policy uncertainty on the price dynamics of energy (crude oil, heating oil and gas) and metal (gold, silver, copper, platinum and palladium) commodity futures in the USA. Using a quantile regression approach for the period 1994–2015, our empirical results show that, after controlling for the effect of general stock market returns and interest rates, there is neither co-movement nor Granger causality between commodity futures prices and financial uncertainty as measured by the VIX or between commodity prices and policy uncertainty. However, we find evidence that financial stress had Granger causality effects in intermediate and upper commodity return quantiles, but no evidence of co-movement. We also show that the impact of the global financial crisis on commodity returns differed across quantiles, only having a negative impact in upper quantiles. Our results indicate that general stock market uncertainty conditions are not so crucial in determining commodity futures prices.