IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v35y2010i3p127-140.html
   My bibliography  Save this article

Understanding world metals prices--Returns, volatility and diversification

Author

Listed:
  • Chen, Mei-Hsiu

Abstract

In recent times, the prices of internationally traded metals have reached record highs and there is considerable uncertainty regarding their future. This phenomenon is partially driven by strong demand from a small number of emerging economies, such as China and India. This paper uses a long time-series (1900-2007) on 21 metals prices to investigate their properties, and presents unique features of their volatility, including a decomposition into within- and between-group components. If most volatility is commodity-specific rather than "global", then metals-exporting dependent economies can smooth income via diversification.

Suggested Citation

  • Chen, Mei-Hsiu, 2010. "Understanding world metals prices--Returns, volatility and diversification," Resources Policy, Elsevier, vol. 35(3), pages 127-140, September.
    • Handle: RePEc:eee:jrpoli:v:35:y:2010:i:3:p:127-140
    as

    Download full text from publisher

    File URL: https://www.sciencedirect.com/science/article/pii/S0301-4207(10)00002-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 1-23.
    2. Labys, W. C. & Achouch, A. & Terraza, M., 1999. "Metal prices and the business cycle," Resources Policy, Elsevier, vol. 25(4), pages 229-238, December.
    3. Scott L. Baier & Mark Clements & Charles W. Griffiths & Jane E. Ihrig, 2009. "Biofuels impact on crop and food prices: using an interactive spreadsheet," International Finance Discussion Papers 967, Board of Governors of the Federal Reserve System (U.S.).
    4. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 1-2.
    5. Bomberger, William A & Makinen, Gail E, 1993. "Inflation and Relative Price Variability: Parks' Study Reexamined," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 854-861, November.
    6. Ma, C.K. & Rao, R.P. & Sears, R.S., 1989. "Volatility, Price Resolution, And The Effectiveness Of Price Limits," Papers t7, Columbia - Center for Futures Markets.
    7. repec:bla:reviec:v:8:y:2000:i:4:p:647-66 is not listed on IDEAS
    8. Sjaastad, Larry A. & Scacciavillani, Fabio, 1996. "The price of gold and the exchange rate," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 879-897, December.
    9. repec:bla:ecorec:v:0:y:1992:i:0:p:10-15 is not listed on IDEAS
    10. McMillan, David G. & Speight, Alan E. H., 2001. "Non-ferrous metals price volatility: a component analysis," Resources Policy, Elsevier, vol. 27(3), pages 199-207, September.
    11. Alaistar Chan & Kenneth W. Clements, 2007. "The International Volatility of Growth," Economics Discussion / Working Papers 07-10, The University of Western Australia, Department of Economics.
    12. Carmen M. Reinhart & Peter Wickham, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 175-213, June.
    13. Baffes, John, 2007. "Oil spills on other commodities," Resources Policy, Elsevier, vol. 32(3), pages 126-134, September.
    14. Davutyan, Nurhan & Roberts, Mark C., 1994. "Cyclicality in metal prices," Resources Policy, Elsevier, vol. 20(1), pages 49-57, March.
    15. Brunetti, Celso & Gilbert, Christopher L., 1995. "Metals price volatility, 1972-1995," Resources Policy, Elsevier, vol. 21(4), pages 237-254, December.
    16. Bresnahan, Timothy F & Suslow, Valerie Y, 1985. "Inventories as an Asset: The Volatility of Copper Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 409-424, June.
    17. Albert Rees & Donald P. Jacobs, 1961. "Real Wages in Manufacturing, 1890-1914," NBER Books, National Bureau of Economic Research, Inc, number rees61-1.
    18. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
    19. Parks, Richard W, 1978. "Inflation and Relative Price Variability," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 79-95, February.
    20. Prasad Bidarkota & Mario J. Crucini, 2000. "Commodity Prices and the Terms of Trade," Review of International Economics, Wiley Blackwell, vol. 8(4), pages 647-666, November.
    21. Kroner, Kenneth F. & Kneafsey, Devin P. & Claessens, Stijn & DEC, 1993. "Forecasting volatility in commodity markets," Policy Research Working Paper Series 1226, The World Bank.
    22. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January.
    23. Vining, Daniel R, Jr & Elwertowski, Thomas C, 1976. "The Relationship between Relative Prices and the General Price Level," American Economic Review, American Economic Association, vol. 66(4), pages 699-708, September.
    24. Sjaastad, Larry A., 2008. "The price of gold and the exchange rates: Once again," Resources Policy, Elsevier, vol. 33(2), pages 118-124, June.
    25. Abbas Valadkhani & Allan P. Layton, 2006. "A Cross-Country Analysis Of Export Prices In Oecd Countries," Economic Papers, The Economic Society of Australia, vol. 25(4), pages 331-346, December.
    26. Jaramillo, Carlos Felipe, 1999. "Inflation and Relative Price Variability: Reinstating Parks' Results," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 375-385, August.
    27. Philip Abbott, 2009. "Development Dimensions of High Food Prices," OECD Food, Agriculture and Fisheries Papers 18, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mei-Hsiu Chen, 2009. "UNDERSTANDING WORLD COMMODITY PRICES Returns, Volatility and Diversification," Economics Discussion / Working Papers 09-03, The University of Western Australia, Department of Economics.
    2. Mei-Hsiu Chen & Kenneth W Clements & Grace Gao, 2013. "Three Facts About World Metal Prices," Economics Discussion / Working Papers 13-01, The University of Western Australia, Department of Economics.
    3. Mei-Hsiu Chen & Ken W. Clements & Grace Gao, 2017. "Three Facts About World Metal Prices," Economics Discussion / Working Papers 17-05, The University of Western Australia, Department of Economics.
    4. Rossen, Anja, 2015. "What are metal prices like? Co-movement, price cycles and long-run trends," Resources Policy, Elsevier, vol. 45(C), pages 255-276.
    5. Baffes, John & Kabundi, Alain, 2023. "Commodity price shocks: Order within chaos?," Resources Policy, Elsevier, vol. 83(C).
    6. Gulnihal Aksoy & Don Bredin & Deirdre Corcoran & Stilianos Fountas, 2016. "Relative Price Dispersion and In flation: Evidence for the UK and the US," Discussion Paper Series 2016_05, Department of Economics, University of Macedonia, revised Dec 2016.
    7. Cleomar Gomes da Silva & Gilberto O. Boaretto, 2018. "Inflation and Relative Price Variability in Brazil: A Time-Varying Parameter Approach," Economics Bulletin, AccessEcon, vol. 38(4), pages 1947-1956.
    8. Vasyl Golosnoy & Anja Rossen, 2018. "Modeling dynamics of metal price series via state space approach with two common factors," Empirical Economics, Springer, vol. 54(4), pages 1477-1501, June.
    9. Monir Uddin Ahmed & Md. Moniruzzaman Muzib & Md. Mahedi Hasan, 2016. "Inflation, inflation uncertainty and relative price variability in Bangladesh," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 389-427, December.
    10. Andaleeb Rahman, 2012. "Characterizing food prices in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-022, Indira Gandhi Institute of Development Research, Mumbai, India.
    11. Cho, Guedae & Kim, MinKyoung & Koo, Won W., 2003. "Relative Agricultural Price Changes In Different Time Horizons," 2003 Annual meeting, July 27-30, Montreal, Canada 22249, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Cuddington, John T. & Ludema, Rodney & Jayasuriya, Shamila A, 2002. "Prebisch-Singer Redux," Working Papers 15857, United States International Trade Commission, Office of Economics.
    13. Chi-Young Choi, 2010. "Reconsidering the Relationship between Inflation and Relative Price Variability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 769-798, August.
    14. André Binette & Sylvain Martel, 2005. "Inflation and Relative Price Dispersion in Canada: An Empirical Assessment," Staff Working Papers 05-28, Bank of Canada.
    15. Arezki, Rabah & Hadri, Kaddour & Loungani, Prakash & Rao, Yao, 2014. "Testing the Prebisch–Singer hypothesis since 1650: Evidence from panel techniques that allow for multiple breaks," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 208-223.
    16. Ahmad R. Jalali‐Naini & Mehdi Asali, 2004. "Cyclical behaviour and shock‐persistence: crude oil prices," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 28(2), pages 107-131, June.
    17. Luis Eduardo Arango & Fernando Arias & Luz Adriana Flórez, 2008. "Trends, Fluctuations, and Determinants of Commodity Prices," Borradores de Economia 521, Banco de la Republica de Colombia.
    18. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 1-2.
    19. Diego Bastourre, 2008. "Inversores Financieros en los Mercados de Commodities: Un Modelo con Dinámica de Ajuste no Lineal al Equilibrio," Department of Economics, Working Papers 072, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    20. Dieter Nautz & Juliane Scharff, 2012. "Inflation and relative price variability in the euro area: evidence from a panel threshold model," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 449-460, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:35:y:2010:i:3:p:127-140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.