|
Activity Number:
|
130
|
|
Type:
|
Contributed
|
|
Date/Time:
|
Monday, August 3, 2009 : 8:30 AM to 10:20 AM
|
|
Sponsor:
|
Business and Economic Statistics Section
|
| Abstract - #305355 |
|
Title:
|
Nonlinear Models of the Bond/Commodity Price Interaction: Evidence from Daily Data
|
|
Author(s):
|
Yuliya V. Yurova*+ and Houston H. Stokes
|
|
Companies:
|
University of Illinois at Chicago and University of Illinois at Chicago
|
|
Address:
|
610 West Belden, Chicago, IL, 60614,
|
|
Keywords:
|
MARS ; VAR ; Causality ; Bond Market ; Inflation ; Commodities
|
|
Abstract:
|
This study investigates approaches that bond investors use to form expectations of inflation measured on a daily basis using continuously compounded returns on Barclay Treasury bond market index and on Center of Research Bureau spot commodity price index for the period from January 3, 1983 to November 30, 2008. We argue that bond holders watch closely commodities markets for early indications of price changes in the aggregate terms. Counterfactual VAR-based tests accompanied by Monte Carlo simulations and bootstrapping procedures showed that the relationships have been stable even after considering the effect of external economic environment on bond market returns expressed as shocks volatility. MARS VAR analysis revealed that significant non-linear effects were linked to unusual daily market moves beyond three standard deviations rather than implicit non-linear nature of relationships.
|
