Transformations  in
Business & Economics

DO COMMODITY PRICES EVOLVE UNIFORMLY?
Eduardo Cuenca Garcia, Margarita Navarro Pabsdorf

ABSTRACT. Between the late 1990s and 2014 the commodity market underwent an unusual expansion. Unlike other upward cycles, this boom spanned across virtually all products and categories. The analysis of the causes of this particular boom has led economists to question whether the commodity market as a whole tends to experience price trends uniformly, or whether the prices of individual commodities evolve in unique patterns.
In this article, however, it is argued that different commodities experience unique price evolutions due to the differing degrees to which they are affected by a variety of economic, environmental, and political factors. Through a principal component factor analysis, the historical price trends of a selection of 23 representative commodities, demonstrating that their price movements are in fact attributable to distinct factors are studied. Further research needs to be done regarding the specific nature of these distinct factors .

KEYWORDS:  commodities, markets, price trends, volatility, factor analysis.

JEL classification:  C38, D43, E64, Q02, Q31.