Time-varying return predictability and adaptive behavior in the U.S. commodity markets during COVID-19

The study investigates the time-varying efficiency of the four most commonly traded international commodities from the U.S. Chicago Board of Options Exchange (CBOE) over a more extended period as well as during COVID-19. The study also explores how adaptive behavior of returns induces profitable opportunities in the commodity markets. Daily returns of commodity indices (gold, silver, oil, metal) are divided into subsamples of six years, to apply a battery of linear/nonlinear tests. The study uncovers the linear and nonlinear serial dependence in returns from commodities and finds evidence of time-varying volatility, thus consistent with the Adaptive Market Hypothesis over the full sample period. Moreover, returns from all the commodities are highly volatile and predictable during COVID-19.