Abstract
We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997 - 2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We also find some evidence that changes in stock market liquidity positively influence changes in individual commodity liquidity.
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