Coherent Identifier About this item: 20.500.12592/fbvv3p

A Dynamic Factor Model for Commodity Prices /

2017

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Summary

'In this note, we present the Commodities Factor Model (CFM), a dynamic factor model for a large cross-section of energy and non-energy commodity prices. The model decomposes price changes in commodities into a common “global” component, a “block” component confined to subgroups of economically related commodities and an idiosyncratic price shock component. Unlike with ordinary factor models, these components have meaningful economic interpretations: the global component mostly relates to global commodity demand shocks, while the idiosyncratic component mostly relates to commodity-specific supply shocks. We give several examples to show that the CFM provides plausible historical decompositions'--Abstract, p. 2.

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economics economy petroleum factor analysis mathematics prices demand supply and demand statistical method forecasting commodity wti west texas intermediate price of oil commodity market brent crude oil west texas intermediate crude oil euclidean vector components

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