Have Aluminium And Copper Futures Markets Become More Volatile Over Time?

Changes in the prices of aluminium and copper are often closely aligned with changes in global industrial production, but also reflect market specific events, compliment and substitute relationships between the physical metals in production, and financial market type influences. Brunetti and Gilbert [1995] characterise two sources of volatility in non-ferrous metals markets, those related to financial market considerations and those related to market fundamentals. Financial considerations include information effects, speculative pressures and hedging activity, usually giving rise to short-run volatility effects. Market fundamentals refer to the underlying availability, supply and demand of physical metal. Fundamentals are a source of long term volatility in metals markets, primarily due to the lags involved in demand and supply side changes.