The correlation and hedging effects between commodity and stock markets

This study uses the Rogers International Commodity Index (RICI) for composite commodities and RICI-Agriculture (RICA), RICI-Energy (RICIE), and RICI-Metals (RICIM) indices to examine the relationship between various commodity and stock markets. The empirical results indicated that stable long-term relationships exist between some commodity and stock markets, and that commodity indices generally lead stock market indices. Thus, in a number of countries/regions, investors can predict fluctuations in stock prices using variations in commodity indices.