On the Volatility Spillover between Agricultural Commodities and Latin American Stock Markets

Candila, Vincenzo; Farace, Salvatore

doi:10.3390/risks6040116

Cited by 10 publications

(4 citation statements)

References 39 publications

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“…Meanwhile, gold index, agricultural Index, wheat, corn, canola, soybean, cocoa, and Australian wool could be used as a hedge by either a negative or no predictability at the most cross quantiles. These results are likely to be consistent with empirical studies from Candila and Farace (2018); Ji et al (2020); Kaur and Dhiman (2021) which showed the absence and negative causality between agricultural commodity and the stock market, especially on emerging or Asian market.…”

Section: Conclusion and Recommendations Conclusionsupporting

confidence: 89%

The Relationship between Agricultural Commodities and Stock Market in Case of Thailand: Safe-haven, Hedge, or Diversifier? – Cross Quantilogram Analysis

Bunditsakulporn¹

2022

Int. j. bus. adm. stud

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This paper proposes to identify Agricultural futures' roles (Safe-haven, Hedge, and Diversifier) in the Thai stock market during 2000-2020 by applying a bivariate Cross-Quantilogram (CQ) approach. The CQ approach can examine the cross-quantile correlation between assets, while the traditional approaches (such as GARCH, DCC, and MSV) examine only mean-to-mean dependency structures. The CQ methodology can estimate the tail dependencies and directional predictability between financial assets more accurately than traditional methods since financial assets typically have a skewed and asymmetric distribution. The correlation between assets during the extreme market condition (tail dependencies) is important to classify a financial asset as a Safe-haven role. The agricultural commodities considered in this study are the most active asset categories in the markets (cereals, oilseeds, other soft commodities, and miscellaneous commodities). The results show that the agricultural assets are more explicitly correlated with the Thai stock market in crisis periods, such as a negative result in canola during COVID-19. Agricultural commodities, including wheat, oats, and canola, can play a strong safe-haven role in the Thai stock market, according to the lowest cross-quantiles (bearish market) data. According to the results of overall quantiles (normal situations), wheat, corn, canola, soybean, and sugar can all be used as hedges. The rolling windows for directional predictability, which show the time-varying CQ, confirm that these agricultural commodities can be served as Safe-havens throughout the study periods. Therefore, including these specific agricultural commodities (Safe-haven or Hedge) in a portfolio of Thai stocks will help lower risk and boost performance under normal and extreme downturn situations.

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Section: Conclusion and Recommendations Conclusionsupporting

confidence: 89%

The Relationship between Agricultural Commodities and Stock Market in Case of Thailand: Safe-haven, Hedge, or Diversifier? – Cross Quantilogram Analysis

Bunditsakulporn¹

2022

Int. j. bus. adm. stud

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“…The challenge for future research is to explore the investigation of the relationship between sugar price volatility and the S&P 500 option-implied volatility index (VIX) by applying the test proposed by Chang and McAleer [95], and also to investigate the volatility spillover effect from commodities, including sugar, to the stock market, as in Candila and Farace [96]. Moreover, further studies conducted for longer time series covering the COVID-19 pandemic period might provide different results and verify our findings' robustness.…”

Section: Research Results and Discussionmentioning

confidence: 99%

Sugar Prices vs. Financial Market Uncertainty in the Time of Crisis: Does COVID-19 Induce Structural Changes in the Relationship?

et al. 2021

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Securitization of the agricultural commodity market has accelerated since the beginning of the 21st century, particularly in the times of financial market uncertainty and crisis. Sugar belongs to the group of important agricultural commodities. The global financial crisis and the COVID-19 pandemic has caused a substantial increase in the stock market volatility. Moreover, the novel coronavirus hit both the sugar market’s supply and demand side, resulting in sugar stock changes. The paper aims to assess potential structural changes in the relationship between sugar prices and the financial market uncertainty in a crisis time. In more detail, using sequential Bai–Perron tests for structural breaks, we check whether the global financial crisis and the COVID-19 pandemic have induced structural breaks in that relationship. Sugar prices are represented by the S&P GSCI Sugar Index, while the S&P 500 option-implied volatility index (VIX) is used to show stock market uncertainty. To investigate the changes in the relationship between sugar prices and stock market uncertainty, a regression model with a sequential Bai–Perron test for structural breaks is applied for the daily data from 2000–2020. We reveal the existence of two structural breaks in the analysed relationship. The first breakpoint was linked to the global financial crisis outbreak, and the second occurred in December 2011. Surprisingly, the COVID-19 pandemic has not induced the statistically significant structural change. Based on the regression model with Bai–Perron structural changes, we show that from 2000 until the beginning of the global financial crisis, the relationship between the sugar prices and the financial market uncertainty was insignificant. The global financial crisis led to a structural change in the relationship. Since August 2008, we observe a significant and negative relationship between the S&P GSCI Sugar Index and the S&P 500 option-implied volatility index (VIX). Sensitivity analysis conducted for the different financial market uncertainty measures, i.e., the S&P 500 Realized Volatility Index confirms our findings.

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“…However, in contrast to the work by Lapan and Sikdar [17], the current article analyses this issue from the point of two market failures that are present in a number of agricultural and food-processed goods traded internationally. First, farmers are exposed to ex ante price uncertainty because of both the delay between the establishment of an agricultural good and the period when it is ready for selling purposes and the global phenomenon of price volatility [18][19][20]. While several strategies have been introduced to help farmers to cope with the price risk, such as market contracts, they have yet to be widely adopted, implying that this imperfection still affects farmer decision-making [21].…”

Section: Introductionmentioning

confidence: 99%

Effects of Sustainable Regulations at Agricultural International Market Failures: A Dynamic Approach

May

Tremma

2023

Sustainability

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Several policies have been proposed to reduce the environmental impact of agricultural trade. However, a number of these policies have low efficiency on a global scale due to side effects on third-competitor countries. The objective of this article is to assess the consequences of these policies under the existence of market failures that characterise the agricultural sector (i.e., ex ante price uncertainty and oligopoly in international markets). In particular, it is shown that some of these policies could cause instability in the agricultural trade system in the short/medium run, as well as permanent adverse side effects on competitor countries. Using a theoretical dynamic model that includes these failures, it was found that instability could be reduced by supplying information that could help producers to improve price forecasting. Likewise, the adverse side effects could be prevented by means of sustainable policies adopted co-ordinately by competitor countries. This latter result is consistent with the general strategies stated by the Climate Club.

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On the Volatility Spillover between Agricultural Commodities and Latin American Stock Markets

Cited by 10 publications

References 39 publications

The Relationship between Agricultural Commodities and Stock Market in Case of Thailand: Safe-haven, Hedge, or Diversifier? – Cross Quantilogram Analysis

The Relationship between Agricultural Commodities and Stock Market in Case of Thailand: Safe-haven, Hedge, or Diversifier? – Cross Quantilogram Analysis

Sugar Prices vs. Financial Market Uncertainty in the Time of Crisis: Does COVID-19 Induce Structural Changes in the Relationship?

Effects of Sustainable Regulations at Agricultural International Market Failures: A Dynamic Approach

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