Jumps in energy and non-energy commodities

Abstract

Jumps in the price process of assets represent a sort of tail risk and are found to affect many aspects of asset pricing, volatility modelling and asset allocation. In this paper, we detect price jumps in the realised volatility series of a wide set of commodity futures and find evidence of jumpy behaviour, especially in energy and agricultural commodities. We examine whether the realised volatilities of commodity futures jump together and find evidence that cojumping is significant and generally clustered within the commodity groups, suggesting some sort of segmentation regarding the tail risk behaviour across energy, agricultural and metals commodities. Additional analysis shows that price jumps and macroeconomic news surprises tend to occur together in specific commodities such as crude oil, which confirms earlier findings about the sensitivity of crude oil to news about the economy.