Price Co-Movement between Electrical Equipment and Metal Commodities—A Time-Frequency Analysis

Abstract

The rising uncertainty of the global markets has caused the price fluctuation of the equipment and materials in PT&D (Power Transmission and Distribution) projects to be more complicated. As the cost of equipment and materials accounts for a large proportion of the total investment of the PT&D projects, this study investigates the co-movement of the equipment and materials price and metal commodities’ price with the use of wavelet coherency and partial wavelet coherency analysis under a time-frequency framework. Our results indicate that (i) the co-movement manifests mainly in the short term and long term; (ii) there is no clear lead-lag relationship in the co-movement; (iii) the short-term co-movement is activated by the continuous rising of metal commodity price; (iv) the long-term co-movement is largely driven by the overall market price movement, but this effect is weakened when the metal is of high importance in producing the equipment. Our study shed light on the planning and investment in the PT&D projects for both the purchase and production sides.