Why are the prices of some commodities (e.g. oil) more volatile than others?
Commodity prices tend to be more volatile than many other prices in the economy because, in the short term, both supply and demand are relatively price inelastic. Increasing commodity production takes time if new crops must be grown, mineral exploration undertaken or oil wells drilled.
Why are oil prices so volatile?
When supply exceeds demand, prices fall; the inverse is also true when demand outpaces supply. The dramatic drop in oil prices in 2014 has been attributed to lower demand for oil in Europe and China, coupled with a steady supply of oil from OPEC. 4 The excess supply of oil caused oil prices to fall sharply.
Why are commodities more volatile than other assets?
Key Takeaways. While equity, bond, and currency markets all have their own unique levels of volatility, commodities are typically more volatile than all of them. Some of the reasons commodities are more volatile include issues with liquidity, potential exposure to natural disasters, and geopolitics.
Is oil the most volatile commodity?
However, on average for the entire period oil and gas have a higher volatility level compared to other commodities with the exception of high grade copper, indicating that petroleum are among the most volatile commodities, and also more volatile than other energy sources.
Which commodities are most volatile?
Commodities Volatility
| Commodity | D | M |
|---|---|---|
| points | % | |
| COTTON FUTURES | 10756 | 222.60 |
| WHEAT FUTURES | 93025 | 222.28 |
| SUGAR FUTURES | 1857 | 201.85 |
Why are fuel prices so volatile?
The reason for volatile prices, inflexible supply and demand
So if there is suddenly an interruption in the supply chain that reduces supplies of oil or gasoline, prices rise until demand drops as much as supply.
What are the five main factors that affect the price of oil?
Factors That Influence Pricing Of Oil And Gas
- Demand.
- Supply.
- Quality of Oil.
- Speculation.
- Demand for Oil.
- Temporary Price Fluctuations.
- Investing in Oil and Gas Drilling.
What is commodity volatility?
The term “price volatility” is used to describe price fluctuations of a commodity. Volatility is measured by the day-to-day percentage difference in the price of the commodity. The degree of variation, not the level of prices, defines a volatile market.
What determines volatility of an asset?
Key Takeaways
Volatility represents how large an asset’s prices swing around the mean price—it is a statistical measure of its dispersion of returns. There are several ways to measure volatility, including beta coefficients, option pricing models, and standard deviations of returns.
Are commodities more volatile than stocks?
Because the supply and demand characteristics change frequently, volatility in commodities tends to be higher than for stocks, bonds, and other types of assets.
What is pricing volatility?
Price volatility is the degree of fluctuation in the price of a commodity due to changes in supply and demand.
Which is the most volatile?
CH3−OH is more volatile. Volatility is due to the tendency to evaporate.
How do you know which compound is more volatile?
Scientists commonly use the boiling point of a liquid as the measure of volatility.
- Volatile liquids have low boiling points.
- A liquid with a low boiling point will begin to boil faster than liquids with higher boiling points.
Which among the following has highest volatility?
Therefore, most volatile (with lower boiling point) is HCl.
How do you identify a volatile market?
Standard deviation is the most common way to measure market volatility, and traders can use Bollinger Bands to analyze standard deviation. Maximum drawdown is another way to measure stock price volatility, and it is used by speculators, asset allocators, and growth investors to limit their losses.
What causes high volatility?
What Causes Market Volatility? Stock market volatility is largely caused by uncertainty, which can be influenced by interest rates tax changes, inflation rates, and other monetary policies but it is also affected by industry changes and national and global events.
What affects market volatility?
Often, market volatility is caused by economic factors, economic news, interest rate changes, and fiscal policy are a few topics that seem to consistently affect the volatility of the market. More recently, a leading factor has been political developments.
What causes high volatility chemistry?
The volatility of an organic chemical is directly related to the vapor pressure of the organic chemical. At a given temperature, an organic chemical with a higher vapor pressure will vaporize (volatilize) more readily than an organic chemical with a lower vapor pressure.
What makes a liquid volatile?
A substance is said to be volatile if it boils at a low temperature, changing from the liquid to the gas phase.
What does highly volatile mean?
In chemistry, volatility is a material quality which describes how readily a substance vaporizes. At a given temperature and pressure, a substance with high volatility is more likely to exist as a vapour, while a substance with low volatility is more likely to be a liquid or solid.
Is oil more volatile than water?
It is only a matter of comparison. Water is more volatile than, for instance, corn oil, but ethyl alcohol is more volatile than water when the three liquids are compared at the same temperature. Raising the temperature will increase the volatility of all three liquids.
Why some liquids are more volatile than others?
Liquids that boil at low temperatures, such as gasoline, are volatile liquids, while liquids that boil at higher temperatures, such as water, are less volatile or nonvolatile. Extremely volatile substances have such low boiling points that they exist as gases at room temperature, such as oxygen gas.
Which is a more volatile liquid?
Presence of hydrogen bonding in a liquid decreases its volatile nature. This is because due to hydrogen bonding, there is more association between the molecules and the tendency to go into gaseous phase decreases. Hence, C6H6 will be more volatile liquid since it has no hydrogen bonding. Was this answer helpful?
What is the difference between high volatility and low volatility?
If the price of a stock fluctuates rapidly in a short period, hitting new highs and lows, it is said to have high volatility. If the stock price moves higher or lower more slowly, or stays relatively stable, it is said to have low volatility.
How do you explain volatility?
Volatility is an investment term that describes when a market or security experiences periods of unpredictable, and sometimes sharp, price movements. People often think about volatility only when prices fall, however volatility can also refer to sudden price rises too.