The Information Content of Commodity Futures Markets

Among commodity futures sectors, only industrial metals returns predict future industrial production growth and revisions in producers’ expectations about future economic conditions across a wide range of countries. This predictive power is stronger in countries more exposed to the global economy, is driven by demand shocks, persists after controlling for trade dependence, continues to hold after the financialization of commodity markets, and is reflected in international stock returns. In contrast, energy and agriculture futures also contain relevant information but mainly for countries that depend on these commodities through trade. Our findings provide global evidence in support of the informational role of commodity markets and identify industrial metals as a reliable barometer of future global economic activity.

This paper was accepted by Lukas Schmid, finance.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00899.