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Measuring parametric and semiparametric downside risks of selected agricultural commodities

Author

Listed:
  • Dejan Živkov

    (Novi Sad School of Business, University of Novi Sad, Novi Sad, Serbia)

  • Marijana Joksimović

    (Faculty of Finances, Banking and Audit, Alfa University, Belgrade, Serbia)

  • Suzana Balaban

    (Faculty of Finances, Banking and Audit, Alfa University, Belgrade, Serbia)

Abstract

In this paper, we evaluate the downside risk of six major agricultural commodities - corn, wheat, soybeans, soybean meal, soybean oil and oats. For research purposes, we first use an optimal generalised autoregressive conditional heteroscedasticity (GARCH) model to create residuals, which we later use for measuring downside risks via parametric and semiparametric approaches. Modified value-at-risk (mVaR) and modified conditional value-at-risk (mCVaR) provide more accurate downside risk results than do ordinary value-at-risk (VaR) and conditional value-at-risk (CVaR). We report that soybean oil has the lowest mVaR and mCVaR because it has two very favourable features - skewness around zero and low kurtosis. The second-best commodity is soybeans. The worst-performing downside risk results are in wheat and oats, primarily because of their very high kurtosis values. On the basis of the results, we propose to investors and various agents involved with these agricultural assets that they reduce the risk of loss by combining these assets with other financial or commodity assets that have low risk.

Suggested Citation

  • Dejan Živkov & Marijana Joksimović & Suzana Balaban, 2021. "Measuring parametric and semiparametric downside risks of selected agricultural commodities," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(8), pages 305-315.
    • Handle: RePEc:caa:jnlage:v:67:y:2021:i:8:id:148-2021-agricecon
    DOI: 10.17221/148/2021-AGRICECON
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    References listed on IDEAS

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    Cited by:

    1. Živkov, Dejan & Manić, Slavica & Gajić-Glamočlija, Marina, 2024. "How do precious and industrial metals hedge oil in a multi-frequency semiparametric CVaR portfolio?," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).

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