Analysis on Price Volatility between WTI Light Crude and Raw Coal
Keywords:
Commodity Price, Volatility Period, Spectral Analysis, Co-Integration Relationship, Lag Effect.Abstract
The supply-demand relations of WTI light crude and raw coal are influenced by the rate of economic growth. Their supply-demand relations are stable in general. There exists interactivity and correlation when their prices fluctuate. Short-term speculation will make the bubble occur in their price volatility. A sliding correlation between the price growth rate of goods and global GDp growth rate is analyzed, and found that the changing tendency is almost the same between the two, however there are some lag in time. To study their interactivity, through the co-integration test between WTI light crude and raw coal, the author concluded that there is a first-order co-integration relationship between the two and their price changes are highly correlated. From the view of spectrum, fluctuations of raw coal prices into long-term and short-term behaviours are divided. We can judge which kind of behaviour plays a dominant role when price volatility happens, based on which we can analyze the liveness of market speculation.
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