@article{Steen:285863,
      recid = {285863},
      author = {Steen, Marie and Gjolberg, Ole},
      title = {Commodity Price Co-Movements: Back to Normal},
      address = {2016-04},
      series = {NCCC-134 Applied Commodity Price Analysis, Forecasting,  and Market Risk Management},
      year = {2016},
      abstract = {We present evidence overruling the claim that commodity  prices over the recent ten years have been moving  increasingly and permanently more in sync in the short  term. True, correlations across physically unrelated  commodities increased during the commodity boom-and-bust  and the financial crisis. However, even during this period  short-term commodity price changes were far from uniform in  terms of covariances and distributions. Applying Principal  Component Analysis (PCA) to weekly price changes for 14  different commodities during the period 2007-08, the first  principal factor explains less than 50 per cent of total  variation and more than five factors are required in order  to explain more than 80 per cent. Since 2009 the covariance  structure has evolved so that the first principal factor  explains far less. After 2012, no single factor explains  more than 25 per cent and seven factors are needed in order  to explain more than 80 per cent. This is quite similar to  the results from the PCA for the period 1990-2006,  suggesting that the covariance structure has reverted back  to what was normal prior to 2007. The large growth in  commodity futures trading and commodity investments – often  referred to as commodity “financialization” - has not  turned commodities into “one” asset. Prices of different  commodities behave differently.},
      url = {http://ageconsearch.umn.edu/record/285863},
      doi = {https://doi.org/10.22004/ag.econ.285863},
}