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How do commodity futures respond to macroeconomic news?

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Abstract

This paper investigates the impact of seventeen US macroeconomic announcements on two broad and representative commodity futures indices. Based on a large sample from 1989 to 2005, we show that the daily price response of the CRB and GSCI commodity futures indices to macroeconomic news is state-dependent. During recessions, news about higher (lower) inflation and real activity lead to positive (negative) adjustments of commodity futures prices. In contrast, we find no significant reactions during economic expansions. We attribute this asymmetric response to the state-dependent interpretation of macroeconomic news. Our findings are robust to several alternative business cycle definitions.

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Authors and Affiliations

  1. Corporate Finance Seminar and Centre for Financial Research (CFR), University of Cologne, Albertus-Magnus Platz, 50923, Cologne, Germany

    Dieter Hess & Alexandra Niessen

  2. Graduate School of Risk Management, University of Cologne, Meister-Ekkehard-Str. 11, 50923, Cologne, Germany

    He Huang

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  1. Dieter Hess
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  2. He Huang
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  3. Alexandra Niessen
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Correspondence to Alexandra Niessen.

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Hess, D., Huang, H. & Niessen, A. How do commodity futures respond to macroeconomic news?. Financ Mark Portfolio Manag 22, 127–146 (2008). https://doi.org/10.1007/s11408-008-0074-x

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