Co-movement of major energy, agricultural, and food commodity price returns: A time-series assessment*

- We examine the extent of co-movement among monthly commodity price returns.
- Focus on 11 major energy, agricultural and food commodities for the period 1970-2013
- Price returns of energy and agricultural commodities are highly correlated.
- Increase in the degree of energy-agricultural price co-movement in recent years
- Stock market volatility is positively associated with correlation of price returns.

Using monthly data between 1970 and 2013, we provide a comprehensive analysis of the extent of co-movement (measured by correlation coefficients) among the nominal price returns of 11 major energy, agricultural, and food commodities. We study the degree and the time evolution of unconditional and conditional correlations using a uniform-spacings estimation and testing approach, multivariate dynamic conditional correlation models, and a rolling regression procedure. We find that (1) the price returns of energy and agricultural commodities are highly correlated; (2) the overall level of co-movement among commodities increased in recent years, especially between energy and agricultural commodities, and in particular in the cases of maize and soybean oil, which are important inputs in the production of biofuels; and (3) the stock market volatility is positively associated with the co-movement of price returns across markets, especially after 2007.