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

Panagiotou, Dimitrios; Tseriki, Alkistis

doi:10.1108/jrf-04-2021-0063

Cited by 8 publications

(12 citation statements)

References 47 publications

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“…When it comes to turbulence period, the vulnerability of stock markets to external shocks is a concern for policymakers, investors and asset managers, who are looking different ways to minimize the risk thereof Panagiotou and Tseriki (2022). Several studies deal with spillover effects and show mixed empirical results depending on the context.…”

Section: Literature Reviewmentioning

confidence: 99%

The Ramadan effect on commodity and stock markets integration

Amar

Goutte

Hasnaoui

et al. 2023

RAF

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Purpose This study aims to investigate the dependence structure and volatility spillovers among two strategic commodities (crude oil and gold) and a set of Islamic and conventional regional stock market indices, while examining the Ramadan effect Design/methodology/approach The empirical strategy consists of two complementary measures of dependence and connectedness. This study first uses copulas to examine the dependency between the markets considered, then spillovers compute the magnitude of the connectedness among them. Findings The copulas analysis shows that Frank’s copula appears to better capture the relationship between most asset returns and highlights the almost absence of extreme dependence and, therefore, the existence of diversification opportunities. Moreover, the connectedness analysis suggests that gold is a net volatility receiver and provides, thereby, greater diversification benefits compared to crude oil. In addition, the high levels of time-varying connectedness support strong integration among the financial markets studied, specifically during the COVID-19 crisis period. Furthermore, the connectedness among the markets studied increases during the Ramdan subperiods, supporting shift contagion among financial markets considered during this religious holiday. Practical implications The results provide investors with a better understanding of the nature as well as the magnitude of the interdependences between commodity markets and a set of Islamic and conventional regional stock markets. Indeed, it is of paramount importance for investors to clearly understand how Islamic and conventional markets are segmented or integrated during stress and stress-free periods, as well as the effect of the month of Ramadan on the interdependence among markets, to better assess risks, diversify portfolios and implement more effective hedging strategies. Originality/value While a considerable body of literature examines financial contagion and volatility transmission between financial markets, there is still much to be said regarding connectedness among commodity and stock markets, particularly when it comes to studying the effects of religious holidays on the interaction between conventional and Islamic assets. This paper fills in this gap by focusing on the dependence structure as well as the connectedness between Islamic stock indices, conventional stock indices, gold and crude oil for six different regions, while examining the Ramadan effect.

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Section: Literature Reviewmentioning

confidence: 99%

The Ramadan effect on commodity and stock markets integration

Amar

Goutte

Hasnaoui

et al. 2023

RAF

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“…More than any other category of commodities, agricultural futures play the most vital role in our everyday life. Understanding and explaining the pattern and the intensity of the relationship between price returns and trading volume provides valuable information about the structure of agricultural futures markets, the level of speculation activity, and its implications for the market stability of the agricultural markets (Panagiotou and Tseriki, 2022). According to Wang and Chen (2016), when a futures price drops, investors with long positions might suffer a loss when trading activity increases.…”

Section: Introductionmentioning

confidence: 99%

“…Because of the abovementioned two points, it is ideal for capturing the true underlying relationship (monotonic/ non-monotonic, linear/nonlinear, symmetric/asymmetric) locally, that is, at any single point of the joint distribution. Panagiotou and Tseriki (2022) tested for directional predictability between price returns and trading volume for the commodities of corn, hard red wheat, oats, rice and soybeans. According to their results, the directional causality from prices to volume is stronger than the opposite direction.…”

Section: Introductionmentioning

confidence: 99%

“…The most pronounced economic impact of the agricultural futures markets is the significant influence they exercise on the spot market prices. During the financial crisis of 2007-2008, traders of agricultural commodities created high spot food prices, which led to riots in less developed countries (Panagiotou and Tseriki, 2022). In addition, according to Evans et al (2011), the recent increases in food commodity prices and their implications for inflation and monetary A discussion on the financial implications policy have attracted the attention of many politicians and policymakers.…”

Section: Introductionmentioning

confidence: 99%

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Testing for monotonicity, linearity and symmetry between trading volume and price returns in the futures markets of agricultural commodities: a discussion on the financial implications

Panagiotou,

Karamanis

2023

SEF

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Purpose The aim of this study is to investigate for monotonicity, linearity and symmetry for the price volatility–trading volume relationship in the futures markets of agricultural commodities. Design/methodology/approach Empirical findings are produced with the use of a highly flexible, nonparametric approach. Data are daily prices and volumes from the commodities of corn, hard red wheat, oats, rice and soybeans. Findings Results reveal violations of monotonicity locally but not globally. Volume and price volatility have, in all markets, a nonlinear relationship to each other, indicating that the strength of the relationship does not remain constant over the entire joint distribution. Global symmetry is rejected for the markets of oats and hard red wheat but cannot be rejected for the remaining three markets. The latter suggests that large values of good volatility are likely to occur together with high trading volumes, as do large values of bad volatility in these markets. Originality/value To the best of the authors’ knowledge, this is the first empirical work to test simultaneously for monotonicity, linearity and symmetry between price volatility and trading volume in the futures markets of agricultural commodities.

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“…They find evidence of a lagged impact of oil prices on firm returns that depend on sectoral location and firm size. Panagiotou and Tseriki (2022) focus on the directional predictability between daily prices and trading volumes of five agricultural commodities (corn, hard red wheat, oats, rice and soybeans). Their results suggest that the link between commodity prices and trading volumes is not the same for all the commodities.…”

Section: Introductionmentioning

confidence: 99%

Time-frequency analysis of the comovement between wheat and equity markets

Amar

Bouattour

Carlotti

2022

JRF

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PurposeThis study aims to investigate the time-frequency comovement between wheat futures traded on three US markets (Chicago Board of Trade (CBOT), Kansas City Board of Trade (KCBOT) and Minneapolis Grain Exchange (MGE)) at different maturities and a global equity index.Design/methodology/approachAs they allow to trace transitional shifts over time and across different frequency bands, this paper relies on continuous wavelet tools to investigate the time-frequency comovement among wheat and global stock markets.FindingsThe results show an increase in wheat futures prices at all maturities and a weak integration level within each wheat market during the subprime crisis. Moreover, the wavelet power spectra maps show high wheat and equity price volatility at different time scales and for various subperiods. Furthermore, the continuous wavelet coherence highlights time-frequency-varying comovements between the markets considered, which become particularly high during times of crisis.Practical implicationsThe results provide market participants with a better understanding of the nature as well as the magnitude of the relationship between the global financial market and different wheat markets at different maturities and during tranquil and crisis periods. Indeed, from investors' perspective it is important to understand how markets are segmented or integrated during tranquil and crisis periods in order to better assess risks, diversify portfolios and implement more effective hedging strategies. As for regulators, a better understanding of the level of integration of different markets would further help refine macroprudential policies, and thus strengthen financial stability and resilience.Originality/valueThis paper enriches the existing literature by investigating the time-frequency comovement between wheat and a global equity market. Indeed, the dynamics between stock and wheat markets across different nearest to maturities have not been widely explored by previous studies.

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

Cited by 8 publications

References 47 publications

The Ramadan effect on commodity and stock markets integration

The Ramadan effect on commodity and stock markets integration

Testing for monotonicity, linearity and symmetry between trading volume and price returns in the futures markets of agricultural commodities: a discussion on the financial implications

Time-frequency analysis of the comovement between wheat and equity markets

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