Working Paper: NBER ID: w19706
Authors: Conghui Hu; Wei Xiong
Abstract: 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.
Keywords: Commodity Futures; Stock Prices; East Asia; Predictive Power; Global Economy
JEL Codes: F3; F4; G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| futures prices of copper and soybeans (G13) | producers' expectations and decisions regarding commodity procurement (Q02) |
| futures prices of copper and soybeans (G13) | real economic activity (E39) |
| global demand shocks (F69) | predictive power of futures prices of copper and soybeans (Q47) |
| lagged overnight returns of copper and soybeans futures (G13) | East Asian stock prices (N25) |
| lagged overnight returns of copper and soybeans futures (G13) | stock prices across all East Asian economies (N25) |