Commonality in the LME aluminium and copper volatility processes through a Figarch lensReport as inadecuate




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Editor: Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Issued date: 2007-02

Serie-No.: UC3M Working Papers. Business Economics07-02

Keywords: Volatility , Persistence , Fractional cointegration , Commodity futures

Rights: Atribución-NoComercial-SinDerivadas 3.0 España

Abstract:We consider dynamic representation of spot and three month aluminium andcopper volatilities. These are the two most important metals traded in theLondon Metal Exchange (LME). They share common business cycle factorsand are traded under identical contractWe consider dynamic representation of spot and three month aluminium andcopper volatilities. These are the two most important metals traded in theLondon Metal Exchange (LME). They share common business cycle factorsand are traded under identical contract specifications. We apply the bivariateFIGARCH model which allows parsimonious representation of longmemory volatility processes. Our results show that spot and three monthaluminium and copper volatilities follow long memory processes, that theyexhibit a common degree of fractional integration and that the processes aresymmetric. However, there is no evidence that the processes are fractionallycointegrated. This high degree of commonality may result from the commonLME trading process.+-





Author: Figuerola-Ferretti, Isabel; Gilbert, Christopher L.

Source: http://e-archivo.uc3m.es


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Universidad Carlos III de Madrid Repositorio institucional e-Archivo http:--e-archivo.uc3m.es Departamento de Economía de la Empresa DEE - Working Papers.
Business Economics.
WB 2007-02 Commonality in the LME aluminium and copper volatility processes through a Figarch lens Figuerola-Ferretti, Isabel http:--hdl.handle.net-10016-593 Descargado de e-Archivo, repositorio institucional de la Universidad Carlos III de Madrid Working Paper 07-02 Business Economics Series 02 February 2007 Departamento de Economía de la Empresa Universidad Carlos III de Madrid Calle Madrid, 126 28903 Getafe (Spain) Fax (34-91) 6249607 COMMONALITY IN THE LME ALUMINIUM AND COPPER VOLATILITY PROCESSES THROUGH A FIGARCH LENS∗ Isabel Figuerola -Ferretti 1 and Christopher L.
Gilbert 2 Abstract We consider dynamic representation of spot and three month aluminium and copper volatilities.
These are the two most important metals traded in the London Metal Exchange (LME).
They share common business cycle factors and are traded under identical contract specifications.
We apply the bivariate FIGARCH model which allows parsimonious representation of long memory volatility processes.
Our results show that spot and three month aluminium and copper volatilities follow long memory processes, that they exhibit a common degree of fractional integration and that the processes are symmetric.
However, there is no evidence that the processes are fractionally cointegrated.
This high degree of commonality may result from the common LME trading process. Keywords: volatility, persistence, fractional cointegration, commodity futures JEL Classification: C32, C12, C13, G12 1 Figuerola-Ferretti, Departamento de Economía de la Empresa, Universidad Carlos III de Madrid.
Spain; email ifgarrig@emp.uc3m.es 2 Gilbert: Dipartimento di Economia, Università degli Studi di Trento, Via Inama 5, 38100 Trento, Italy; email cgilbert@economia.unitn.it 1.
Introduction Aluminium and copper are the most important meta...





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