In this talk, I will give an overview of how commodity-related news affects various aspects of commodity markets. For news data I use the unique database of Thomson Reuters News Analytics Engine.
I examine the main commodity classes: energy, agriculturals and metals, as well as various market responses to news: in terms of prices, returns, volatilities and fine features of prices, such as price jumps. Market responses are analysed for different latencies, ranging from minutes to days and to longer horizons. I will discuss how this information can be used in trading strategies, investment decisions and risk management.
In particular, I address the following questions:
· What are the distinguishing features of commodity-related news?
· How commodity prices react to positive and negative sentiment in news?
· How we can combine news signals from various commodity markets into overall commodity news index? What are the relationships of such a news index with well-known commodity price indices?
· Can we improve volatility forecasts by including news variables in volatility models?
· Which characteristics of commodity price movements – volatility, positive and negative jumps – cause and are caused by news?
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