Sunday, November 25, 2012

Relationship between Cooper Price Change and S&P 500 Total Return

Today we would like to address whether any relationship between copper price and stock market returns can be observed. Both are often interpreted as leading indicators of economic health.

For the cooper price data, we have relied as usual on the USGS data (which we expanded back to 1850 also from USGS). For the S&P 500 data we have used Robert Shiller's data (Yale) going back to 1871. For the calculation of total return we took the dividends plus index valuation for any annual period.

Overall the picture is rather disappointing in the sense that there is really no dependency structure between the two variables as can also be seen in the graphic below:

A left tail dependency might be suspected visually (especially the 1931 data point with -37% copper price change and -40% S&P 500 total return), but corresponding statistical tests don't confirm such relationship.

Obviously the hypothesis of the high co-dependency between copper price changers and stock market return dates back to the Great Depression, where there correlation for the time period 1925 to 1935 was 65%.

However, in the recent episode surrounding the Great Recession, this co-dependency was much lower with a correlation coefficient of 31%.

In a future post we will look at monthly time series to better evaluate lagging behavior (for above episodes, it seems that S&P 500 was somehow leading copper price).

Monday, November 05, 2012

Chile's Export Destinations and Products

Based on data from Chile's national costums service and export promotion agency (ProChile), we put together the following table of countries ranked by their exports for the first three quarters (January to September 2012) with the following data points:
  • country (only 25 largest export destinations)
  • export share (of January to September 2012 total)
  • change relative to same period in 2011
  • main export product

Some observations:
  • the nine largest export market all suffered a decrease in line with the overall decrease of 7.7% (not shown on above table)
  • largest export market is China by a wide margin followed by USA and Japan
  • significant increases in exports to India, Australia and Switzerland
  • significant decreases in exports to Netherlands, Italy, Mexico, Canada, France and Germany
  • stable exports to Spain (where a significant decrease might have been expected)

As expected, copper is the principal export product for most markets. The following export categories are exceptions to the rule:
  • Services for Peru and Argentina
  • Gold for Switzerland
  • Fruit for Colombia and Ecuador
  • Wine for UK