Assessing the relationship between closing prices and trading volume in the US livestock futures markets

Abstract

Purpose The purpose of this paper is to examine the relationship between closing prices and trading volume in the livestock futures markets of lean hogs, live cattle and feeder cattle. Design/methodology/approach The parametric quantile regressions methodology is used. Daily data between January 1, 2010 and July 31, 2019 were used. Findings Findings suggest that the relationship between the two variables is non-linear. Price-volume relationship is positive (negative) under positive (negative) returns. Furthermore, co-movement is weaker at the lower quantiles and stronger at the higher quantiles. Results are in line with the empirical findings of the price-volume relationship in six agricultural futures markets from the study by Fousekis and Tzaferi (2019). Originality/value This is the first study that uses the parametric quantile regressions method in the livestock futures market, to examine the returns-volume dependence.

Directional predictability between trading volume and price returns in the agricultural futures markets: risk implications for traders

“…The most pronounced economic impact of the agricultural futures markets is the significant influence they exercise on the spot market prices (Panagiotou and Tseriki, 2020). During the financial crisis of 2007–2008, traders of agricultural commodities created high spot food prices which led to riots in less developed countries.…”

“…Be ˛dowska-S ojka and Kliber (2019) and Yu et al (2015) discovered evidence of bidirectional causality. Fousekis and Tzaferi (2019) and Panagiotou and Tseriki (2020) detected a statistically significant impact of returns on volume at certain quantiles, for the markets of six agricultural futures and three livestock futures commodities, respectively.…”

“…Nonlinear causality tests have discovered evidence of bidirectional causality (Be ˛dowska-S ojka and Kliber, 2019; Yu et al, 2015). Quantile regressions studies (Fousekis and Tzaferi, 2019;Gebka and Wohar, 2013;Panagiotou and Tseriki, 2020) reported that causality between raw returns and volume is nonlinear and there is a statistically significant impact of trading volume/returns on subsequent raw returns/ volume at certain quantiles.…”

“…Trading volume in the markets of agricultural futures has increased tremendously in the last 30 years (Panagiotou and Tseriki, 2020). Accordingly, the empirical investigation of the association between trading volume and price or price volatility in the agricultural and livestock futures markets has been an increasingly investigated topic (Fousekis and Tzaferi, 2019;Martin and Garcia, 1981;Oellermann et al, 1989;Panagiotou and Tseriki, 2020;Power and Turvey, 2011;Purcell and Hudson, 1985;Schroeder and Goodwin, 1991).…”

“…Trading volume in the markets of agricultural futures has increased tremendously in the last 30 years (Panagiotou and Tseriki, 2020). Accordingly, the empirical investigation of the association between trading volume and price or price volatility in the agricultural and livestock futures markets has been an increasingly investigated topic (Fousekis and Tzaferi, 2019;Martin and Garcia, 1981;Oellermann et al, 1989;Panagiotou and Tseriki, 2020;Power and Turvey, 2011;Purcell and Hudson, 1985;Schroeder and Goodwin, 1991). Taking into account that a large number of empirical works has revealed that returns do contain information about trading activity (Fousekis and Tzaferi, 2019) and concurrently trading volume has information about prices (Fousekis, 2020), it is surprising that predictability between returns and trading volume in the markets for agricultural futures has not been explicitly investigated.…”