Co-movement of commodity prices – results from dynamic time warping classification

Śmiech, Sławomir (2014): Co-movement of commodity prices – results from dynamic time warping classification.

Abstract

Several factors are responsible for difficulties in describing the behaviour of commodity prices. Firstly, there are numerous different categories of commodities. Secondly, some categories overlap with other categories, while others indirectly compete in the market. Thirdly, although essentially commodity prices react to changes in economic conditions or exchange rates, to a large extent these prices depend on supply disturbances. However, in recent years commodity prices co-move, and researchers, beginning with Pindyck and Rotemberg (1990), have been trying to explain this phenomenon. The objective of the article is to conduct the classification of the series of commodity prices in the pre-crisis and after-crisis periods. The results of such classification will reveal whether co-movement of commodity prices is the same in both periods. The analysis is based on monthly data from the period January 1990 to February 2014. All prices and price indices are published by the World Bank. The results obtained in dynamic time warping clustering reveal that co-movement of commodity prices is more evident in the pre-crisis period. There are only several paths which determine commodity prices.

• Item Type: MPRA Paper
• Language: English
• Keywords: Commodity prices, time series clustering, co-movement, dynamic time warping
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C38 - Classification Methods ; Cluster Analysis ; Principal Components ; Factor Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q02 - Commodity Markets

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