Monetary policy uncertainty, positions of traders and changes in commodity futures prices

Gospodinov, Nikolay; Jamali, Ibrahim

doi:10.1111/eufm.12150

Cited by 32 publications

(23 citation statements)

References 108 publications

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“…Unanticipated changes in fiscal policy (i.e., a fiscal shock) can influence stock market returns via its effect on sovereign risk spreads, and affect volatility through leverage and trading activity channels (Gospodinov and Jamali, 2018). Following Cooley and Prescott (1976), we model the time-variation as a driftless random walk and estimate using maximum likelihood via the Kalman filter.…”

Section: Introductionmentioning

confidence: 99%

125 Years of time-varying effects of fiscal policy on financial markets

Marfatia

Gupta

Miller

2020

International Review of Economics & Finance

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This paper examines the effect of fiscal policy on financial markets over a long span of 125 years. Unlike existing studies that mainly focus on monetary policy shocks and model-based identification of fiscal policy shocks, we use a time-varying parameter model to study the effect of fiscal policy with much cleaner and direct identification of fiscal policy shocks. In addition, we extend our analysis by measuring the response volatility in these markets and separately study the effects of good and bad components of volatility. We find significant time-variation in the response of stock and bond market returns and volatility. The overall response of the stock market exceeds that of bond markets, with more pronounced effects in the pre-1950 period than in the last six decades. Fiscal consolidation generates long-term benefits that positively affect financial markets in the latter part of the 20 th century, thus providing new insights into the dynamic role of fiscal policy.

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Section: Introductionmentioning

confidence: 99%

125 Years of time-varying effects of fiscal policy on financial markets

Marfatia

Gupta

Miller

2020

International Review of Economics & Finance

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“…Moreover, Gospodinov and Jammali (2016) evaluated the effects of monetary policy 2 A safe haven is an investment that is expected to retain its value or even rise in times of turmoil. uncertainty on commodity prices.…”

Section: Introductionmentioning

confidence: 99%

Measuring the response of gold prices to uncertainty: An analysis beyond the mean

2018

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This paper provides an innovative perspective on the role of gold as a hedge and safe haven. We use a quantile-on-quantile regression approach to capture the dependence structure between gold returns and changes in uncertainty under different gold market conditions, while considering the nuances of uncertainty levels. To capture the core uncertainty effects on gold returns, a dynamic factor model is used. This technique allows summarizing the impact of six different indexes (namely economic, macroeconomic, microeconomic, monetary policy, financial and political uncertainties) within one aggregate measure of uncertainty. In doing so, we show that the gold's role as a hedge and safe haven cannot be assumed to hold at all times. This ability seems to be sensitive to the gold's various market states (bearish, normal or bullish) and to whether the uncertainty is low, middle or high. Interestingly, we find a positive and strong relationship between gold returns and the uncertainty composite indicator when the uncertainty attains its highest level and under normal gold market scenario. This suggests that holding a diversified portfolio composed of gold could help protecting against exposure to uncertain risks. Acknowledgement: The authors would like to thank the editor Sushanta Mallick and the two anonymous Reviewers for helpful and insightful comments and suggestions on an earlier version of this article. Highlights We examine the response of gold returns to different uncertainty indicators. We use a quantile-on-quantile regression model.  We develop an uncertainty composite indicator based on six uncertainty factors. The hedge and safe haven ability of gold is conditional on gold market states. The gold's role as a hedge and safe haven depends on the nuances of uncertainty.

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“…Basistha and Kurov (2015) examine the effect of monetary policy surprises on energy commodity prices and find a significant impact at an intraday frequency, but the accumulated responses over several days after the announcement are insignificant. Gospodinov and Jamali (2018) examine the effect of monetary policy uncertainty on commodity spot prices but find that it is not significantly priced in the cross section of individual commodity prices. More importantly, Daskalaki et al (2014) examine whether there exist common factors in the cross section of individual commodity futures returns and find that individual commodity futures returns are substantially heterogeneous, which means that they depend on commodity‐specific factors rather than common factors.…”

Section: Resultsmentioning

confidence: 99%

“…This paper explores the effect of economic uncertainty on international commodity futures markets for the first time. Gospodinov and Jamali (2018) examine whether monetary policy uncertainty is priced in the U.S. commodity markets, but they examine commodity spot returns and not commodity futures returns. More importantly, they stress that monetary policy uncertainty and economic uncertainty are different 2…”

Section: Introductionmentioning

confidence: 99%

Does economic uncertainty matter in international commodity futures markets?

Kim

Kwon

2020

Int. J Fin Econ

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This paper examines whether economic uncertainty risk is significantly priced in international commodity futures markets. Contrary to the belief that commodity futures are sensitive to economic uncertainty, our results provide concrete evidence that uncertainty risk is not significantly priced. To explain these results, we examine whether financial intermediaries who are supposed to be marginal investors are not uncertainty averse. We find that the effect of economic uncertainty becomes insignificant after financialization, that is, a large inflow of financial investors, in 2004 and the relation between economic uncertainty and intermediaries' leverage ratio is insignificant. These results suggest that economic uncertainty might not be priced because it is not a significant concern of financial intermediaries.

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Monetary policy uncertainty, positions of traders and changes in commodity futures prices

Cited by 32 publications

References 108 publications

125 Years of time-varying effects of fiscal policy on financial markets

125 Years of time-varying effects of fiscal policy on financial markets

Measuring the response of gold prices to uncertainty: An analysis beyond the mean

Does economic uncertainty matter in international commodity futures markets?

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Monetary policy uncertainty, positions of traders and changes in commodity futures prices

Cited by 32 publications

References 108 publications

125 ​Years of time-varying effects of fiscal policy on financial markets

125 ​Years of time-varying effects of fiscal policy on financial markets

Measuring the response of gold prices to uncertainty: An analysis beyond the mean

Does economic uncertainty matter in international commodity futures markets?

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Product

Resources

About

125 Years of time-varying effects of fiscal policy on financial markets

125 Years of time-varying effects of fiscal policy on financial markets