THE SYNCHRONIZED AND LONG-LASTING STRUCTURAL CHANGE ON COMMODITY MARKETS: EVIDENCE FROM HIGH FREQUENCY DATA

This paper analyses the co-movements between the United States stock market and several commodity futures between 1997 and 2011, by computing dynamic conditional correlations at: (i) 1-hour; (ii) 5-minute; (iii) 10-second; and (iv) 1-second frequencies. We document a synchronized structural break, characterized by correlations that have significantly departed from zero to positive territories since late September 2008 and have also remained exceptionally high as of December 2011. Our results support the presence of high frequency trading and algorithmic strategies on commodity markets and have implications for the debate on the financialization of these markets.