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Global Macroeconomic Determinants of the Domestic Commodity Derivatives

In: Global Approaches in Financial Economics, Banking, and Finance

Author

Listed:
  • Cagatay Basarir

    (Bandirma Onyedi Eylul University)

  • Mehmet Fatih Bayramoglu

    (Bulent Ecevit University)

Abstract

Countries compete with products which have an absolute advantage in foreign trade operations. Also, there are derivative financial instruments derived from these products in many developing financial markets. Thus, these products provide opportunities for investors such as speculation, arbitrage, and particularly hedging with the help of trading in derivative markets. The trading of these products on derivative markets also brings about the impact of global parameters on spot markets, as well as on futures markets. Hence, it is important for both real investors and financial investors to determine and observe the major macroeconomic variables that affect these products. This chapter aims to determine macroeconomic variables which affect domestic (local) commodity derivatives such as banana (Central America and Ecuador), palm oil (Malaysia), rice (Thailand), and tea (Kenya). Thereby when the market efficiency is weak or almost absent, the ability to lower the fragility against risks faced by the investors and the other related parties by maintaining advance information is analyzed. For this purpose, K* (K Star) algorithm as a data mining method which is one of the knowledge-based analysis techniques is used in the analysis. In this chapter, four derivative products were estimated by the K* algorithm, which predicts whether their direction will decrease or increase during the next 18 months. The results show that the K* algorithm predicts an accuracy of 66.7–72.2% for three of the four domestic commodity derivatives so that this algorithm is successful in identifying similar properties between global macroeconomic variables and domestic commodity derivatives.

Suggested Citation

  • Cagatay Basarir & Mehmet Fatih Bayramoglu, 2018. "Global Macroeconomic Determinants of the Domestic Commodity Derivatives," Contributions to Economics, in: Hasan Dincer & Ümit Hacioglu & Serhat Yüksel (ed.), Global Approaches in Financial Economics, Banking, and Finance, chapter 0, pages 331-349, Springer.
    • Handle: RePEc:spr:conchp:978-3-319-78494-6_16
    DOI: 10.1007/978-3-319-78494-6_16
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    References listed on IDEAS

    as
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    13. repec:dau:papers:123456789/607 is not listed on IDEAS
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