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Modeling The Dynamics Of International Agricultural Commodity Prices: A Comparison Of Garch And Stochastic Volatility Models

Author

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  • LU YANG

    (School of Finance, Zhongnan University of Economics and Law, No. 182 Nanhu Avenue, East Lake High-tech Development Zone, Wuhan 430073, P. R. China)

  • SHIGEYUKI HAMORI

    (Graduate School of Economics, Kobe University, 2-1 Rokkodai, Nada-Ku, Kobe 657-8501, Japan)

Abstract

In this study, we employ generalized autoregressive conditional heteroscedastic (GARCH) and stochastic volatility models to investigate the dynamics of wheat, corn, and soybean prices. We find that the stochastic volatility model provides the highest persistence of the volatility estimation in all cases. In addition, based on the monthly data, we find that the jump process and asymmetric effect do not exist in agricultural commodity prices. Finally, by estimating Value at risk (VaR) for these agricultural commodities, we find that the upsurge in agricultural prices in 2008 may have been caused by financialization.

Suggested Citation

  • Lu Yang & Shigeyuki Hamori, 2018. "Modeling The Dynamics Of International Agricultural Commodity Prices: A Comparison Of Garch And Stochastic Volatility Models," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 1-20, September.
    • Handle: RePEc:wsi:afexxx:v:13:y:2018:i:03:n:s2010495218500100
    DOI: 10.1142/S2010495218500100
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    References listed on IDEAS

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    3. Yuki Toyoshima & Shigeyuki Hamori, 2018. "Measuring the Time-Frequency Dynamics of Return and Volatility Connectedness in Global Crude Oil Markets," Energies, MDPI, vol. 11(11), pages 1-18, October.
    4. Rezitis, Anthony N. & Kastner, Gregor, 2021. "On the joint volatility dynamics in international dairy commodity markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(2), January.
    5. Hanif, Waqas & Mensi, Walid & Vo, Xuan Vinh & BenSaïda, Ahmed & Hernandez, Jose Arreola & Kang, Sang Hoon, 2023. "Dependence and risk management of portfolios of metals and agricultural commodity futures," Resources Policy, Elsevier, vol. 82(C).
    6. Mehmet Balcilar & Ojonugwa Usman & Busra Agan, 2024. "On the connectedness of commodity markets: A critical and selective survey of empirical studies and bibliometric analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 38(1), pages 97-136, February.

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