Are Commodity Futures Prices Barometers of the Global Economy?

Conghui Hu, Wei Xiong

NBER Working Paper No. 19706
Issued in December 2013
NBER Program(s):   AP   IFM

This paper analyzes whether commodity futures prices traded in the United States reveal information relevant to stock prices of East Asian economies including China, Japan, Hong Kong, South Korea, and Taiwan. We find significant and positive predictive powers of overnight futures returns of copper and soybeans, albeit not crude oil, for stock prices of all these East Asian economies and across a broad range of industries after mid-2000s. Our analysis establishes commodity futures prices as barometers of global economic strength in recent years, but leaves open a deeper issue regarding whether through this informational channel noise from futures market trading can feed back to the real economy.

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Document Object Identifier (DOI): 10.3386/w19706

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