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Modeling dynamics of metal price series via state space approach with two common factors

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Abstract

In this paper, we model the dynamics of 100 years long monthly price series of eight nonferrous and precious metals. Applying the state space framework, we impose and identify two common factors related to nonferrous and precious metals, respectively, which exhibit quite distinct autoregressive dynamics. The preferred two common factor specifications outperform single common factor approaches, especially in the second half of the sample. Furthermore, we provide an interpretation for the extracted common factors by investigating their exposure to the major macroeconomic fundamentals.

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Notes

  1. The dataset has been created in the context of the project “Ursachen von Preispeaks, -einbrüchen und -trends bei mineralischen Rohstoffen” (Bräuninger et al. 2013) funded by the Federal Institute for Geoscience and Natural Resources (BGR).

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Acknowledgements

This work has been supported in part by the Collaborative Research Center “Statistical modeling of nonlinear dynamic processes” (SFB 823, Teilprojekt A1) of the German Research Foundation (DFG) as well as by the Federal Institute of Geosciences and Natural Resources (BGR). We are also indebted to two anonymous referees for their helpful and constructive remarks and suggestions.

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Authors and Affiliations

  1. Faculty of Management and Economics, Ruhr-Universität Bochum, Bochum, Germany

    Vasyl Golosnoy

  2. Institute for Employment Research (IAB), Nuremberg, Germany

    Anja Rossen

Authors
  1. Vasyl Golosnoy
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  2. Anja Rossen
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Correspondence to Vasyl Golosnoy.

Appendix

Appendix

This dataset was created in the context of the project “Ursachen von Preispeaks, -einbrüchen und -trends bei mineralischen Rohstoffen” (Bräuninger et al. 2013) funded by the Federal Institute for Geoscience and Natural Resources (BGR) and is part of the BGR price database (Table 6).

Table 6 Data sources and data description
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Golosnoy, V., Rossen, A. Modeling dynamics of metal price series via state space approach with two common factors. Empir Econ 54, 1477–1501 (2018). https://doi.org/10.1007/s00181-017-1267-9

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