MA Thesis

Commodity Futures Volatility and Uncertainty During COVID-19 Pandemic



Published in:

Kyiv School of Economics
commodity volatility and uncertainty
COVID-19 pandemic

The 2020 year has changed our life significantly. The world remembered the word “Pandemic” and was faced with a new one “lockdown”. There was an increase in uncertainty in the world and volatility in the financial markets. Commodity futures volatility is our variable of interest. This study aims to discover the connection between uncertainty and commodity futures volatility in that period. We decomposed world uncertainty into three elements: economic, financial, and emotional uncertainties. We used trading data for six commodity futures from the New York Board Trade for the last two years 2019 and 2020. One year before the pandemic and one year during the pandemic. Also, Google trends data, Consensus forecast, and VIX to compose an index of economic, emotional, and financial uncertainties. We estimated the relationship by the panel data controlling for the futures contracts. We used an unbiased extreme value volatility estimator and standard deviation as two measures of volatility. Results stay that emotional and financial uncertainties had a significant effect on the futures volatility. The connection with economic uncertainty is no so clear.