Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices

The recent and rapidly growing interest in biofuel as a green energy source has raised concerns about its impact on the prices, returns and volatility of related agricultural commodities. Analyzing the spillover effects on agricultural commodities and biofuel helps commodity suppliers hedge their po...

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Detalhes bibliográficos
Autores: Chang, Chia-Lin, McAleer, Michael, Wang, Yu-Ann
Formato: informe técnico
Fecha de publicación:2017
País:España
Recursos:Universidad Complutense de Madrid (UCM)
Repositorio:Docta Complutense
Idioma:inglés
OAI Identifier:oai:docta.ucm.es:20.500.14352/22881
Acesso em linha:https://hdl.handle.net/20.500.14352/22881
Access Level:acceso abierto
Palavra-chave:C32
C58
G13
G15
Q14
Q42
Biofuel
Spot prices
Futures prices
Returns
Volatility
Risk
Co-risk
Bio-ethanol
Corn
Sugarcane
Diagonal BEKK model
Co-volatility spillover effects
Hedging
Risk management.
Economía financiera
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oai_identifier_str oai:docta.ucm.es:20.500.14352/22881
network_acronym_str ES
network_name_str España
repository_id_str
spelling Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures PricesChang, Chia-LinMcAleer, MichaelWang, Yu-AnnC32C58G13G15Q14Q42BiofuelSpot pricesFutures pricesReturnsVolatilityRiskCo-riskBio-ethanolCornSugarcaneDiagonal BEKK modelCo-volatility spillover effectsHedgingRisk management.Economía financieraThe recent and rapidly growing interest in biofuel as a green energy source has raised concerns about its impact on the prices, returns and volatility of related agricultural commodities. Analyzing the spillover effects on agricultural commodities and biofuel helps commodity suppliers hedge their portfolios, and manage the risk and co-risk of their biofuel and agricultural commodities. There have been many papers concerned with analyzing crude oil and agricultural commodities separately. The purpose of this paper is to examine the volatility spillovers for spot and futures returns on bio-ethanol and related agricultural commodities, specifically corn and sugarcane. The diagonal BEKK model is used as it is the only multivariate conditional volatility model with well-established regularity conditions and known asymptotic properties. The daily data used are from 31 October 2005 to 14 January 2015. The empirical results show that, in 2 of 6 cases for the spot market, there were significant negative co-volatility spillover effects: specifically, corn on subsequent sugarcane co-volatility with corn, and sugarcane on subsequent corn co-volatility with sugarcane. In the other 4 cases, there are no significant co-volatility spillover effects. There are significant positive co-volatility spillover effects in all 6 cases, namely between corn and sugarcane, corn and ethanol, and sugarcane and ethanol, and vice-versa, for each of the three pairs of commodities. It is clear that the futures prices of bio-ethanol and the two agricultural commodities, corn and sugarcane, have stronger co-volatility spillovers than their spot price counterparts. These empirical results suggest that the bio-ethanol and agricultural commodities should be considered as viable futures products in financial portfolios for risk management.Facultad de Ciencias Económicas y Empresariales. Instituto Complutense de Análisis Económico (ICAE)Universidad Complutense de Madrid20172017-01-0120172017-01-01technical reporthttp://purl.org/coar/resource_type/c_18ghinfo:eu-repo/semantics/reportapplication/pdfhttps://hdl.handle.net/20.500.14352/22881reponame:Docta Complutenseinstname:Universidad Complutense de Madrid (UCM)Inglésengopen accesshttp://purl.org/coar/access_right/c_abf2Atribución-NoComercial-CompartirIgual 3.0 Españahttps://creativecommons.org/licenses/by-nc-sa/3.0/es/info:eu-repo/semantics/openAccessoai:docta.ucm.es:20.500.14352/228812026-06-02T12:44:21Z
dc.title.none.fl_str_mv Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
title Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
spellingShingle Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
Chang, Chia-Lin
C32
C58
G13
G15
Q14
Q42
Biofuel
Spot prices
Futures prices
Returns
Volatility
Risk
Co-risk
Bio-ethanol
Corn
Sugarcane
Diagonal BEKK model
Co-volatility spillover effects
Hedging
Risk management.
Economía financiera
title_short Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
title_full Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
title_fullStr Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
title_full_unstemmed Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
title_sort Modelling Volatility Spillovers for Bio-ethanol, Sugarcane and Corn Spot and Futures Prices
dc.creator.none.fl_str_mv Chang, Chia-Lin
McAleer, Michael
Wang, Yu-Ann
author Chang, Chia-Lin
author_facet Chang, Chia-Lin
McAleer, Michael
Wang, Yu-Ann
author_role author
author2 McAleer, Michael
Wang, Yu-Ann
author2_role author
author
dc.contributor.none.fl_str_mv Universidad Complutense de Madrid
dc.subject.none.fl_str_mv C32
C58
G13
G15
Q14
Q42
Biofuel
Spot prices
Futures prices
Returns
Volatility
Risk
Co-risk
Bio-ethanol
Corn
Sugarcane
Diagonal BEKK model
Co-volatility spillover effects
Hedging
Risk management.
Economía financiera
topic C32
C58
G13
G15
Q14
Q42
Biofuel
Spot prices
Futures prices
Returns
Volatility
Risk
Co-risk
Bio-ethanol
Corn
Sugarcane
Diagonal BEKK model
Co-volatility spillover effects
Hedging
Risk management.
Economía financiera
description The recent and rapidly growing interest in biofuel as a green energy source has raised concerns about its impact on the prices, returns and volatility of related agricultural commodities. Analyzing the spillover effects on agricultural commodities and biofuel helps commodity suppliers hedge their portfolios, and manage the risk and co-risk of their biofuel and agricultural commodities. There have been many papers concerned with analyzing crude oil and agricultural commodities separately. The purpose of this paper is to examine the volatility spillovers for spot and futures returns on bio-ethanol and related agricultural commodities, specifically corn and sugarcane. The diagonal BEKK model is used as it is the only multivariate conditional volatility model with well-established regularity conditions and known asymptotic properties. The daily data used are from 31 October 2005 to 14 January 2015. The empirical results show that, in 2 of 6 cases for the spot market, there were significant negative co-volatility spillover effects: specifically, corn on subsequent sugarcane co-volatility with corn, and sugarcane on subsequent corn co-volatility with sugarcane. In the other 4 cases, there are no significant co-volatility spillover effects. There are significant positive co-volatility spillover effects in all 6 cases, namely between corn and sugarcane, corn and ethanol, and sugarcane and ethanol, and vice-versa, for each of the three pairs of commodities. It is clear that the futures prices of bio-ethanol and the two agricultural commodities, corn and sugarcane, have stronger co-volatility spillovers than their spot price counterparts. These empirical results suggest that the bio-ethanol and agricultural commodities should be considered as viable futures products in financial portfolios for risk management.
publishDate 2017
dc.date.none.fl_str_mv 2017
2017-01-01
2017
2017-01-01
dc.type.none.fl_str_mv technical report
http://purl.org/coar/resource_type/c_18gh
dc.type.openaire.fl_str_mv info:eu-repo/semantics/report
format report
dc.identifier.none.fl_str_mv https://hdl.handle.net/20.500.14352/22881
url https://hdl.handle.net/20.500.14352/22881
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
Atribución-NoComercial-CompartirIgual 3.0 España
https://creativecommons.org/licenses/by-nc-sa/3.0/es/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
Atribución-NoComercial-CompartirIgual 3.0 España
https://creativecommons.org/licenses/by-nc-sa/3.0/es/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Facultad de Ciencias Económicas y Empresariales. Instituto Complutense de Análisis Económico (ICAE)
publisher.none.fl_str_mv Facultad de Ciencias Económicas y Empresariales. Instituto Complutense de Análisis Económico (ICAE)
dc.source.none.fl_str_mv reponame:Docta Complutense
instname:Universidad Complutense de Madrid (UCM)
instname_str Universidad Complutense de Madrid (UCM)
reponame_str Docta Complutense
collection Docta Complutense
repository.name.fl_str_mv
repository.mail.fl_str_mv
_version_ 1869423281757487104
score 15,811543

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