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Forecasting Commodity Prices Using the Term Structure

School of Business, Faculty of Social Sciences, University of Haifa, Haifa 3498838, Israel
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Academic Editor: James W. Kolari
J. Risk Financial Manag. 2021, 14(12), 585; https://doi.org/10.3390/jrfm14120585
Received: 5 November 2021 / Revised: 28 November 2021 / Accepted: 30 November 2021 / Published: 4 December 2021
(This article belongs to the Special Issue Frontiers of Asset Pricing)
The aim of this study is to test the ability of the yield curve on US government bonds to forecast the future evolution in the prices of commodities often used in as raw materials. We consider the monthly prices of nine commodities for more than 30 years. Our findings, confirmed by several parametric and non-parametric tests, are robust and indicate that the ability to forecast future performance changes over time. Specifically, between 1986 and the early 2000s the yield curve was quite successful in forecasting monthly changes in commodity prices, but that success diminished in the period following. One possible explanation for this outcome is the increased flow of capital into the commodity market resulting in stronger correlations with the equity markets and a breakdown of the obvious relationship between commodities and business cycle. Our findings are important for asset pricing, commodity traders and policy makers. View Full-Text
Keywords: forecasting; commodity market; metals; term structure; yield spread forecasting; commodity market; metals; term structure; yield spread
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MDPI and ACS Style

Idilbi-Bayaa, Y.; Qadan, M. Forecasting Commodity Prices Using the Term Structure. J. Risk Financial Manag. 2021, 14, 585. https://doi.org/10.3390/jrfm14120585

AMA Style

Idilbi-Bayaa Y, Qadan M. Forecasting Commodity Prices Using the Term Structure. Journal of Risk and Financial Management. 2021; 14(12):585. https://doi.org/10.3390/jrfm14120585

Chicago/Turabian Style

Idilbi-Bayaa, Yasmeen, and Mahmoud Qadan. 2021. "Forecasting Commodity Prices Using the Term Structure" Journal of Risk and Financial Management 14, no. 12: 585. https://doi.org/10.3390/jrfm14120585

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