ABSTRACT
In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. We observe a substantial degree of heterogeneity in the behavior of the series. Our ndings show that it is inappropriate to treat dierent kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversi-er of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the dierences across commodities and between model specications.
