COVID-19 and commodity pricing premium: Evidence from the Chinese market
Lu Zhang1, Pei-Lin Hsieh2, Haiqiang Chen3
1The Department of Finance, School of Economics, Xiamen University, Xiamen, China.
Abstract:
Our paper studies the impact of the COVID-19 epidemic on commodity pricing premiums in the Chinese commodity futures market. After summarizing the explanatory power of documented benchmark pricing factors, we apply the difference-in-difference regression for our event study. We document a substantial impact of the COVID-19 pandemic on increasing the commodity basis premium by at least 30%. Basis-momentum premium, especially for agriculture futures, also increases during the epidemic. The results are robust and validated by sub-sample regressions. The influence of COVID-19 on the commodity market is more prevailing than the trade war.
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