Commodity futures returns: more memory than you might think!

Coakley, Jerry; Kellard, Neil; Wang, Jian

Abstract

© 2015 Taylor & Francis. This paper investigates long-range dependence in 14 commodity and 3 other financial futures returns series from 1993 to 2009 and shows that long memory is a pervasive phenomenon in contrast to the extant evidence. Utilizing a semi-parametric wavelet-based estimator with time windows, the results provide overwhelming evidence of time-varying long-range dependence in all futures returns series. Structural break tests indicate multiple regimes of dependence, in the majority of which the persistence parameter is statistically significant. The results also provide evidence of predominantly negative parameter values which are known as anti-persistence. The latter is consistent with investor overreaction to shocks and suggests temporary departures from market efficiency.

Citation

Coakley, J., Kellard, N., & Wang, J. (2016). Commodity futures returns: more memory than you might think!. The European journal of finance, 22(14), 1457-1483. https://doi.org/10.1080/1351847X.2015.1025989

• Journal Article Type: Article
• Acceptance Date: Mar 2, 2015
• Online Publication Date: Apr 15, 2015
• Publication Date: Nov 13, 2016
• Deposit Date: Mar 17, 2015
• Publicly Available Date: Apr 15, 2015
• Journal: European journal of finance
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 22
• Issue: 14
• Pages: 1457-1483
• DOI: https://doi.org/10.1080/1351847X.2015.1025989
• Keywords: Temporal long-term dependence, Structural breaks, Market efficiency, Wavelet, Overreaction
• Public URL: https://hull-repository.worktribe.com/output/371714
• Publisher URL: http://www.tandfonline.com/doi/full/10.1080/1351847X.2015.1025989
• Additional Information: Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=rejf20