Liquidity Commonality in Commodities

30 Pages Posted: 12 May 2010 Last revised: 27 Jul 2011

See all articles by Ben R. Marshall

Ben R. Marshall

Massey University - School of Economics and Finance

Nhut H. Nguyen

Auckland University of Technology

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: July 27, 2011

Abstract

We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997 - 2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We also find some evidence that changes in stock market liquidity positively influence changes in individual commodity liquidity.

Keywords: Commodity, Liquidity, Commonality

JEL Classification: G11, G12, G13

Suggested Citation

Marshall, Ben R. and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Liquidity Commonality in Commodities (July 27, 2011). 23rd Australasian Finance and Banking Conference 2010 Paper, Available at SSRN: https://ssrn.com/abstract=1603705 or http://dx.doi.org/10.2139/ssrn.1603705

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

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Nhut H. Nguyen

Auckland University of Technology ( email )

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Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

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