April 2020

Contents

Hedging and Risk Management

Commodities as Asset Class

Derivatives Markets

Economic Linkages

Price Movements and Forecasting

Volatility Trends and Spillover Analysis

Commodities and Other Financial Markets

Latest from Blogs

CFA Institute Blog

Goldhub blog – World Gold Council

World Bank Blogs

IMF Blog

St. Louis Fed on the Economy Blog

Federal Reserve Bank of New York Blog - Liberty Street Economics

London School of Economics Blog

Hedging and Risk Management

Optimal hedging under biased energy futures markets

Dolores Furió, Hipòlit Torró
Energy Economics

This study examines UK natural gas market and finds a statistically significant time-varying negative
futures bias that can be forecasted with confidence for suggesting most effective and best performing
hedging strategies.
Full paper

Futures market hedging efficiency in a new futures exchange: Effects of trade partner
diversification
Atle Oglend, Hans‐Martin Straume
Journal of Futures Markets

The paper utilizes data on firm‐level exporter/importer transaction prices to quantify firm‐level
futures hedging efficiency and finds hat larger firms with greater trade partner diversification have
lower basis risk.
Full paper

Optimal futures hedging for energy commodities: An application of the GAS model
Yingying Xu, Donald Lien
Journal of Futures Markets
This paper applies generalized autoregressive score‐driven (GAS) models to futures hedging of crude
oil and natural gas. Results show that hedge ratio is not inherently inferior to the time‐varying
alternatives.
Full paper

Are Chinese Crude Oil Futures Good Hedging Tools?

Jie LI, Lixin HUANG, Ping LI
Finance Research Letters

This study investigates dynamic correlations between Chinese crude oil futures and spot prices of
OPEC and Oman along with their hedging effectiveness. Results show that the correlations and
hedging effectiveness are quite strong.
Full paper

In Search of Gold: Insights From Google Searches on Portfolio Hedging Effectiveness

Philipp Prange
SSRN Paper No: 3551940

This paper analyses online investor attention based on Google searches and suggests that the
informational content of Google searches increases the hedging effectiveness of combined portfolios.
Full paper
Price Controls: Good Intentions, Bad Outcomes
Guenette, Justin Damien
World Bank Policy Research working paper no: WPS 9212

This paper explores price controls in emerging market economies with respect to key commodities
and suggests that it is essential to have well-capitalized stabilization funds or national hedging
strategies to ensure fiscal sustainability.
Full paper

Commodities as Asset Class

The role of financial investors in determining the commodity futures risk premium
Mohammad Isleimeyyeh
Journal of Futures Markets

This paper attempts to study the interaction between the commodity and stock markets. Results show
that the effect of the stock market on the energy market became significantly greater for the futures
risk premium following the 2008 crisis.
Full paper
A revisit to the hedge and safe haven properties of gold: New evidence from China
Lei Ming, Xinran Zhang, Qianqiu Liu, Shenggang Yang
Journal of Futures Markets

This paper examines the role of gold as a hedge and safe haven from the perspective of Chinese
investors and finds that gold is not a hedge against the Chinese stock market on average but, acts as a
safe haven.
Full paper

Derivatives Markets

Estimating the connectedness of commodity futures using a network approach

Binqing Xiao, Honghai Yu Libing Fang Sifang Ding
Journal of Futures Markets

This study measures the static and dynamic connectedness of 18 commodity futures and shows that
metal futures are net transmitters of shocks to other futures, and agricultural futures are vulnerable to
shocks from the others.
Full paper

The market quality of commodity futures markets

Qingfu Liu, Qian Luo, Yiuman Tse, Yuchi Xie
Journal of Futures Markets
This paper examines the determinants of market quality of commodity futures and finds that
macroeconomic variables and futures market contracts are significantly related to the market quality
of Chinese commodity futures.
Full paper

Economic Linkages

Agricultural policy reforms: Roles of markets and states in China and India
Uma Lele, Sambuddha Goswami
Global Food Security

This paper compares China's reform process with India's and argues that the Chinese state has played
a key role in transforming China into a modern economic state, while India's reforms are still a work
in progress.
Full paper

Exiting the fossil world: The effects of fuel taxation in the UK

L. Bretschger, E. Grieg
Center of Economic Research at ETH Zurich Working Paper 20/332
This paper examines the concerns about negative impact of carbon taxes theoretically and empirically.
Results show that fuel taxes are a very efficient instrument to reduce fossil-based transportation and
that they support public transport.
Full paper

The oil-slick trade: An analysis of embodied crude oil in China's trade and consumption
Wencheng Zhang, Rui Wei, Shuijun Peng
Energy Economics

This paper examines crude oil embodied in China's trade during 1995–2011 and shows that
approximately one fifth to one third of imported oil in China is re-exported in the form of
commodities and services for satisfying final consumption outside China.
Full paper

When does USDA information have the most impact on crop and livestock markets?
Olga Isengildina-Massa, Xiang Cao, Berna Karali, Scott H. Irwin, Michael Adjemian, Robert C.
Johansson
Journal of Commodity Markets

This study analyses the impact of Prospective Plantings, Acreage, Crop Production, Crop Production
Annual Summary, Grain Stocks, WASDE, Cattle on Feed, and Hogs and Pigs reports on corn,
soybean, wheat, cotton, live cattle, and lean hogs markets over 1985–2018.
Full paper
Price Movements and Forecasting

Asymmetric volatility in commodity markets

Yu-Fu Chen, Xiaoyi Mu
Journal of Commodity Markets

The paper studies the return–volatility relationship in a range of commodities with a commodity price
model and shows that the volatility of price changes can be positively or negatively related to demand
shocks.
Full paper

Commodity price co-movement: heterogeneity and the time-varying impact of fundamentals

Joseph P Byrne, Ryuta Sakemoto, Bing Xu
European Review of Agricultural Economics, Volume 47, Issue 2, April 2020, Pages 499–528

This paper analyses co-movement and determinants of primary commodity prices considering
heterogeneity and time variation. Results suggest that agricultural raw materials, food and metals
respond heterogeneously to these shocks.
Full paper

Predictability in Commodity Markets: Evidence from More Than a Century

Fabian Hollstein, Marcel Prokopczuk, Björn Tharann and Chardin Wese Simen
SSRN Paper No: 3567630
This paper analyzes the predictive power of a broad set of macroeconomic variables for risk and
return in commodity spot markets and finds that industrial production growth and inflation are the
strongest predictors for future commodity excess returns.
Full paper

Downside Uncertainty Shocks in the Oil and Gold Markets

Tai-Yong Roh, Suk Joon Byun, Yahua Xu
SSRN Paper No: 3553676

This paper examines the downside uncertainty risks originated from crude oil and gold markets and
shows that the gold market's exposure to downside uncertainty shocks is cross-sectionally priced in
the stock market while that of crude oil is not.
Full paper

Crude oil price dynamics with crash risk under fundamental shocks
Cho-Hoi Hui, Chi-Fai Lo, Chi-Hin Cheung, Andrew Wong
SSRN Paper No: 3550929

This paper analyses the oil price model with uncertain boundaries and results show the oil price
dynamics can be calibrated, where the mean reversion of the price dynamics is positively co-
integrated with the oil production.
Full paper
Factors driving oil price - from the perspective of United States
Chi-Wei Su, Meng Qin, Ran Tao, Nicoleta-Claudia Moldovan, Oana-Ramona Lobonţ
Energy

This study investigates the contributions of partisan conflicts (PCI), the dollar index (USDX) and U.S.
oil production (PRO) on the oil price and concludes that the impact of dollar is greater than political
conflicts and U.S. oil production.
Full paper

Volatility Trends and Spillover Analysis

Forecasting realized volatility of agricultural commodities

Stavros Degiannakis, George Filis, Tony Klein, Thomas Walther
International Journal of Forecasting

This study forecasts the volatility of agricultural commodities using variants of the heterogeneous
autoregressive and shows that the variants of the HAR model offer better fitting in the predictive
regressions.
Full paper
Asymmetric volatility in commodity markets
Yu-Fu Chen, Xiaoyi Mu
Journal of Commodity Markets

The paper studies the return–volatility relationship in a range of commodities and shows that the
volatility of price changes can be positively or negatively related to demand shocks.
Full paper

Commodities and Other Financial Markets

Accrual earnings management in response to an oil price shock

Frode Kjærland, Fredrik Kosberg, Mathias Misje
Journal of Commodity Markets

This study examines the relationship between oil price shock of 2014 and earnings
management of oil companies listed and finds a significant increase in earnings management
following the oil price drop.
Full paper
 Latest from Blogs

CFA Institute Blog

Three Tools to Improve the Fund Manager–Client Relationship

Dan Conner, CFA, FSA

If an Investment Strategy Looks Too Good to Be True, Look under the Hood
Clifford S. Ang, CFA and Merritt Lyon

Don’t Panic! Coronavirus, GDP, and Unemployment

Laurence B. Siegel and Stephen C. Sexauer

ESMA: The Increasing Importance of ESG Disclosures

Mohini Singh, ACA

FED Support of US Banks: Stop the Dividend Madness

Kurt Schacht, JD, CFA

Ethics in Practice: Trading on Pandemic Information. Case and Analysis–Week of 20 April

Jon Stokes

Headwinds Approaching: Are ESG Investors Prepared?

Gautam Dhingra, PhD, CFA and Christopher J. Olson, CFA
Goldhub blog – World Gold Council

COVID-19 steals sheen off gold demand on Akshaya Tritiya

Mukesh Kumar

Gold ETF inflows remained strong but not unprecedented in April

Adam Perlaky

World Bank Blogs

Coronavirus and commodity markets: Lessons from history

Peter Nagle

Tracking the economic impact of the coronavirus (COVID-19) from space

Javier E. Baez, Varun Kshirsagar, Emmanuel Skoufias

Free trade now: A case for tariff reductions and non-tariff measures simplifications to fight COVID-
19 (coronavirus)
Ana Fernandes, Hiau Looi Kee, Caglar Ozden

A green economic recovery for South Asia

Urvashi Narain and Hasita Bhammar

Foreign direct investment and global value chains in the wake of COVID-19
Christine Zhenwei, Qiangyan Liu, Monica Paganini, Victor Steenbergen
Fintech can help in the response to COVID-19. But where should policymakers start?
Sharmista Appaya, Helen Luskin Gradstein, Thervina Mathurin-Andrew

IMF Blog

Tracking Trade During the COVID-19 Pandemic

Diego Cerdeiro, Andras Komaromi, Yang Liu, and Mamoon Saeed

Emerging from the Great Lockdown in Asia and Europe

Changyong Rhee and Poul M. Thomsen

A Post-Coronavirus Recovery in Asia—Extending a “Whatever it Takes” Lifeline to Small

Businesses
Kenneth Kang and Changyong Rhee

The Short-term Liquidity Line: A New IMF Tool to Help in the Crisis
Geoffrey Okamoto

St. Louis Fed on the Economy Blog

How will COVID-19 Affect Financial Assets, Delinquency and Bankruptcy?

Juan Sánchez
How the Impact of Social Distancing Ripples through the Economy
Fernando Leibovici; Ana Maria Santacreu and Matthew Famiglietti

Federal Reserve Bank of New York Blog - Liberty Street Economics

Putting the Current Oil Price Collapse into Historical Perspective

Jan J. J. Groen and Michael B. Nattinger

How Did China’s COVID-19 Shutdown Affect U.S. Supply Chains?

Sebastian Heise

W(h)ither U.S. Crude Oil Production?

Matthew Higgins and Thomas Klitgaard

London School of Economics Blog

Coronavirus and the stock market: science cannot predict the outcome, but does it matter?
Nicolas Martelin and Jamie Ness
 Supply chains need to develop immunity to natural disasters
Rob Handfield

The density and connectedness of cities now appear as weaknesses

Rune Dahl Fitjar

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