Jumps in Commodity Markets

Nguyen, Duc Binh Benno; Prokopczuk, Marcel

doi:10.2139/ssrn.3074540

Cited by 8 publications

(12 citation statements)

References 45 publications

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“…This statistic is very close to the 1.3% reported by Christensen, Oomen, and Podolskij () for DJIA constituent markets, but above 0.4% and – 1.3% for foreign exchanges and equity index markets. This finding also contrasts with Nguyen and Prokopczuk () who find that commodity markets have less jump variance than the stock market. These differences may reflect differences in time periods, procedures, and data used.…”

Section: Empirical Design and Resultscontrasting

confidence: 90%

Are Corn Futures Prices Getting “Jumpy”?

Couleau¹,

Serra²,

Garcia³

2020

American J Agri Economics

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The article sheds light on price jump risk in corn futures prices in the era of electronic trading and after the shift to real‐time announcement of USDA reports. Using intraday prices from 2008 to 2015, we employ a nonparametric test to detect jumps and variance analysis to assess the relative importance of jump risk. Real‐time trading of major USDA reports has substantially increased the frequency and clustering of price jumps, and results in higher market liquidity costs. In contrast, although the presence of jumps on non‐announcement days has doubled recently, their magnitude has declined as have transactions costs during their occurrence. The largest jump risk or execution risk is experienced by high frequency traders due to heightened microstructure noise during price jumps. However, traders holding long‐term market positions are only minimally affected by increased jump risk.

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Section: Empirical Design and Resultscontrasting

confidence: 90%

Are Corn Futures Prices Getting “Jumpy”?

Couleau¹,

Serra²,

Garcia³

2020

American J Agri Economics

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“…Time periods used in studies vary, however, all of studies used at least 3-year data on futures prices. The longest observation period is 19 years used by Nguyen and Prokopczuk (2018). A longer observation period is important for the better understanding on how dairy futures price volatility act during different economic environments, including different stages of economic cycle.…”

Section: Resultsmentioning

confidence: 99%

The effect of diary futures trading activity on their price volatility: literature review

Staugaitis¹

2019

Science and Studies of Accounting and Finance: Problems and Perspectives

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Dairy futures price volatility plays an important role in dairy farmers' risk management as well as dairy commodities price discovery. Trading activity as a factor for agricultural futures price volatility has been studied extensively since the emerge of commodity index traders followed by commodity markets becoming more volatile in the last decade. However, the majority of research papers investigate major cereal future contracts whereas the research on dairy futures is not yet analyzed. The aim of this review is to present the current situation in the research of dairy futures trading activity effect on their price volatility, focusing on methodological progress and related issues. This review provides a comparative analysis of empirical research articles on dairy futures price volatility and its determinants published in 2005 and later. Dairy futures markets compared to other agricultural commodity markets were less liquid and more fragmented, however, they likewise experienced a significant price volatility and seasonality during observed time periods. High price volatility was especially present in cash settled butter futures. Even though there is an indication among selected studies that trading activity correlate with price volatility, this should be supplemented by an analysis of causal relationships. Therefore, a further research on dairy futures should provide necessary tools to measure the exact effect of trading activity on price volatility in order to provide better insights on using dairy futures as an effective means for managing price risk in dairy sector.

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“…When it comes to the commodity market, early studies generally focus on fluctuations of the commodity prices from the perspective of international trade, that is, the mechanism by which imports and exports disturb commodity price and change the commodity market structure, which is a microscopic analysis of the supply and demand relationship of commodities [1,2]. However, with the emergence of potential benefits in the commodity market, financial institutions and retail investors have substantially increased their exposures to commodities and have a net long-term position which has promoted the development of commodity financialization and gradually freed them from the shackles of the real economy, thus being decoupled from the simple dynamics of supply and demand [3][4][5].…”

Section: Introductionmentioning

confidence: 99%

The Impact of Geopolitical Risk on Systemic Risk Spillover in Commodity Market: An EMD‐Based Network Topology Approach

Ding¹,

Zhang²

2021

Complexity

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Since the financialization of commodities, portfolio investments have become an important tool for investors to diversify risks. However, due to the nonlinear fluctuations brought about by extreme events, investors face more difficulties in the choice of risk portfolio. We adopt empirical mode decomposition and STVAR model, along with the basis data of optimized original sample interval. In addition, we retain the mature research of multiscale systemic risk under frequency and divide the dimension of systemic risk into two states. When frequency is combined with states, the risk spillover center undergoes subversive changes, particularly in the longest term, and metals become the risk spillover center, substituting the energy commodity, on the condition that the compositions of extreme value add persuasive power to the perspective of long term. We proposed that the joint fluctuation of agricultural commodities and energy commodities makes the former become another important risk spillover point. For investors, holding period and portfolio both need to be considered.

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Jumps in Commodity Markets

Cited by 8 publications

References 45 publications

Are Corn Futures Prices Getting “Jumpy”?

Are Corn Futures Prices Getting “Jumpy”?

The effect of diary futures trading activity on their price volatility: literature review

The Impact of Geopolitical Risk on Systemic Risk Spillover in Commodity Market: An EMD‐Based Network Topology Approach

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