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Factor Structure in Commodity Futures Return and Volatility

  • Peter Christoffersen, Asger Lunde and Kasper V. Olesen


We uncover stylized facts of commodity futures’ price and volatility dynamics in the post-financialization period and find a factor structure in daily commodity volatility that is much stronger than the factor structure in returns. The common factor in commodity volatility relates to stock market volatility as well as to the business cycle. Model-free realized commodity betas with the stock market were high during 2008–2010 but have since returned to the pre-crisis level, close to 0. While commodity markets appear segmented from the equity market when considering only returns, commodity volatility indicates a nontrivial degree of market integration.


Corresponding author

*Christoffersen, formerly of the University of Toronto Rotman School of Management, Copenhagen Business School, and Center for Research in Econometric Analysis of Time Series (CREATES); Lunde,, Aarhus University Department of Economics and Business Economics and CREATES; Olesen (corresponding author),, Aarhus University Department of Economics and Business Economics and CREATES.


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We are grateful for comments from Hendrik Bessembinder (the editor), Kim Christensen, Stephen Figlewski, Christian Hafner, Nikolaus Hautsch, and Avraham Kamara (the referee) as well as participants at the 2016 Annual Volatility Institute Conference at the NYU Stern School of Business, the 2014 CIREQ Conference on High-Frequency Financial Data, the 2013 Aarhus University Finance Research Group Conference, and CREATES research seminars. We acknowledge support from the Center for Research in Econometric Analysis of Time Series (CREATES, DNRF78), funded by the Danish National Research Foundation. Christoffersen was also supported by Bank of Canada, GRI (, and the Social Sciences and Humanities Research Council of Canada. Lunde and Olesen were supported by the Aarhus University Research Foundation Pilot Center. Part of the research was done while Olesen was with Bank of America Merrill Lynch. The opinions and views expressed in this paper are those of the authors and not necessarily those of their employers. All errors are our own. We regret that our coauthor Peter Christoffersen passed away prior to the publication of this article. We are grateful for his contributions to this research effort.



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