Empirical Economics

, Volume 53, Issue 3, pp 927–958 | Cite as

Metals: resources or financial assets? A multivariate cross-sectional analysis

  • Fabian Lutzenberger
  • Benedikt Gleich
  • Herbert G. Mayer
  • Christian Stepanek
  • Andreas W. Rathgeber


Metals are very important resources for industrial production, but recently they have attracted more and more attention from investors. While certainly industrial producers, consumers, and financial investors do have some influence on metal price development, the role of relevant price factors is not yet quite clear. Therefore, in this paper, we examine the explanatory power of various fundamental factors and characteristics known from financial markets, specifically on the expected returns in a unique data sample of 30 metals. We apply—to our knowledge for the first time in this context—the widely accepted method of characteristic-sorted portfolios, extended by the very recent method of two-way portfolio sorts as an alternative to classical multivariate regressions. This mostly nonparametric approach, combined with portfolio aggregation, provides very robust results. Our major finding is that the financial characteristics value and momentum have a very high predictive power for monthly returns of metal portfolios. Metal-specific fundamental factors like stocks, secondary production, apparent consumption, country concentration, mine production, or reserves perform depending on the interpretation moderately well or rather poorly, regarding some economically interpretable transformations and when using multivariate two-way sorts. Hence, from the perspective of expected returns, metals are predominantly assets, while fundamental metal-specific factors still play a non-negligible role. Thus, to a much lesser extent, metals can still be regarded as resources. Overall, the combination of financial characteristics and metal-specific fundamental factors yields the best results. With these robust results, we hope to contribute to a better understanding of metal prices and their underlying factors.


Metals Value Momentum Fundamentals Cross-sectional analysis Nonparametric 

JEL Classification

G12 G17 Q02 



An early draft of this paper has been presented at the 22nd Annual Conference of the Multinational Finance Society (MFS) 2015 in Halkidiki (Greece). We thank the discussant Georgios Skoulakis for his valuable comments. A further draft has been presented at the Energy and Commodity Finance Conference (ECOMFIN) 2016 at ESSEC in France. We thank the discussant Hipòlit Torró for his valuable comments. Furthermore, we want to thank the anonymous reviewers of this journal for their valuable and detailed comments. Additionally, we gratefully acknowledge partial support from the Bavarian Research Alliance (BayFOR) through the program “ForChange”, supported by the Bavarian State Ministry of Education, Science, and the Arts. Last but not least, we want to thank the German Federal Institute for Geosciences and Natural Resources (BGR) for providing us with an extensive and invaluable data set on metal prices and fundamental metal-specific variables.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  • Fabian Lutzenberger
    • 2
  • Benedikt Gleich
    • 1
  • Herbert G. Mayer
    • 1
  • Christian Stepanek
    • 1
  • Andreas W. Rathgeber
    • 1
  1. 1.Professorship for Finance, Information and Resource Management, Institute of Materials Resource ManagementUniversity of AugsburgAugsburgGermany
  2. 2.Research Center Finance and Information ManagementUniversity of AugsburgAugsburgGermany

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