Oil commodity returns and macroeconomic factors: A time-varying approach

Christophe Schalck , Régis Chenavaz (1, 2)

1 LTCI - Laboratoire Traitement et Communication de l'Information
2 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

This paper analyses the dynamic influence of macroeconomic factors on oil commodity returns (crude oil and heating oil) shown in monthly data over the period of 1990-2013. Using a time-varying parameter model via the Kalman filter, we find that macroeconomic factors are relevant for explaining oil commodity returns. We find that multilateral exchange rates have a negative effect on commodity returns. We confirm the existence of a strong linkage between energy and non-energy commodities. More importantly, we find shifts in global demand and SP500 effects that are not identified through the constant parameter model. These variables have had a progressively positive effect on oil commodity returns, especially since 2008.

Keywords: Commodity prices; Kalman filter; Oil; Time-varying model

Domains: Humanities and Social Sciences; Humanities and Social Sciences; Economics and Finance

Christophe Schalck, Régis Chenavaz. Oil commodity returns and macroeconomic factors: A time-varying approach. Research in International Business and Finance, 2015, 33 (C), pp.290-303. ⟨10.1016/j.ribaf.2014.05.002⟩. ⟨hal-01457334⟩