A Volatility Analysis of Agricultural Commodity and Crude Oil Global Markets

Jamel Trabelsi, Mohamed Mehdi Jelassi, Gaye Del Lo

Abstract


The purpose of this study is to provide insights on volatility features of major agricultural commodity global markets. In order to achieve this, we estimate the volatility in the global markets of crude oil and four main agricultural commodities, namely rice, wheat, cotton and coffee over the period 1980:2014. We also investigate the nexus between the volatilities in these global markets. More precisely, we first model the volatility of agricultural commodity and crude oil markets based on the GARCH methodology. Second, we assess the risk in these global markets by the Value-at-Risk technique. Finally, we evaluate the co-movements between returns in agricultural commodity and crude oil markets by the copula methodology. Our empirical findings reveal that, unlike in the financial market, upside shocks in the agricultural market tend to increase volatility more than downside shocks do. In addition to that, risk in global agricultural commodity markets turned out to be high and little evidence in favor of interdependence between these markets is found. Moreover, the co-movement between agricultural commodity market risk and oil prices is detected for recent years only and little evidence is found for the whole sample period.


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DOI: https://doi.org/10.11114/aef.v4i2.2086

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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