Estimating the Impact of Financial Investments on Agricultural Futures Prices using Changes in Volatility

Hachula, Michael; Rieth, Malte

doi:10.1093/ajae/aaz024

Cited by 9 publications

(12 citation statements)

References 37 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The effects on volatility in all three commodities are most pronounced in the VIX, which means that volatility in equity markets is transmitted to cash crops. This potential equity-to-commodity link has been shown by multiple studies (see, for example, Cheng et al, 2015;Hachula and Rieth, 2020). However, OIL and EXR are significant only for the volatility of coffee and cotton returns.…”

Section: Resultsmentioning

confidence: 78%

“…The DNM can be used to analyse the effect of a strong demand by different trader types on commodity futures prices, as it identifies situations in which actors within a specific category initiate trades. The use of techniques that fail to differentiate such initiated trades from trades that respond to OI positions in other categories could be a reason for mixed results on the influence of speculators' OI changes and futures returns (Hachula and Rieth, 2020).…”

Section: Measure Construction and Data Descriptionmentioning

confidence: 99%

See 1 more Smart Citation

The Financialization of Coffee, Cocoa and Cotton Value Chains: The Role of Physical Actors

Tröster,

Gunter

2023

Development and Change

View full text Add to dashboard Cite

The prices of cash crops impact the livelihoods of millions of households in developing countries. While the influence of speculators on global commodity prices determined through derivatives exchanges is extensively discussed, the contribution of hedgers to short‐term changes in futures prices has largely been disregarded in the financialization of commodities discourse over the past two decades. This results in a failure to account for the interconnected activities of increasingly consolidated lead firms within physical global value chains (GVCs) and derivatives markets. This article examines the pricing and hedging strategies of lead firms in the coffee, cocoa and cotton GVCs in relation to their activities on commodity derivatives markets. Based on Open Interest data as an indicator of derivatives markets activity, a measure of buying and selling pressure by trader categories is applied in a Generalized ARCH (GARCH) model. The findings of this article show that hedgers’ activities allow speculators to drive global benchmark prices so that they can benefit through combinations of financial hedging and physical trading strategies. As these practices of lead firms contribute to the transmission of futures prices along GVCs, smallholders and other actors in cash crops in producer countries are exposed to heightened price changes.

show abstract

Section: Resultsmentioning

confidence: 78%

Section: Measure Construction and Data Descriptionmentioning

confidence: 99%

The Financialization of Coffee, Cocoa and Cotton Value Chains: The Role of Physical Actors

Tröster,

Gunter

2023

Development and Change

View full text Add to dashboard Cite

show abstract

“…During periods of moderate currency liquidity, IRU has negative impacts on FCP by reducing food consumption, due to the substitution effect of savings, but these negative impacts are small [ 95 , 96 ]. FU has greater impacts on FCP in the time of high currency liquidity [ 99 , 100 ]. SDU has positive impacts on FCP by diversifying food varieties and improving quality and market construction [ 94 ].…”

Section: Resultsmentioning

confidence: 99%

Dynamic Impacts of External Uncertainties on the Stability of the Food Supply Chain: Evidence from China

Song

2022

Foods

View full text Add to dashboard Cite

The food supply chain operates in a complex and dynamic external environment, and the external uncertainties from natural and socio-economic environment pose great challenges to the development of the food industry. In particular, the COVID-19 pandemic and Russia–Ukraine conflict have further exacerbated the vulnerability of the global food supply chain. Analyzing the dynamic impacts of external uncertainties on the stability of food supply chain is central to guaranteeing the sustainable security of food supply. Based on the division of food supply chain and the classification of external uncertainties, the TVP-FAVAR-SV model was constructed to explore the dynamic impacts of external uncertainties on food supply chain. It was found that the impacts of external uncertainty elements were significantly different, the combination of different external uncertainty elements aggravated or reduced the risks of food supply chain. And some uncertainty elements had both positive and negative impacts in the whole sample period, as the magnitude and direction of the impacts of various uncertainties in different periods had time-varying characteristics.

show abstract

“…Global oil price volatility has received considerable attention from scholarly publications in economic discipline. Accordingly, this has led to varied conceptualizations of what constitutes 'volatility' (Troiano & Villa, 2020;Hachula & Rieth, 2020). Several scholars have argued that volatility in oil prices refers to the dispersion of the price of oil in the global market from its average over a given period as argued (Sauter & Awerbuch, 2003;Gulen & Michot, 2012;Ebrahim, Inderwildi & King, 2014).…”

Section: Introductionmentioning

confidence: 99%

Global Oil Price Volatility and Foreign Direct Investment Inflows in Kenya

2021

JESD

View full text Add to dashboard Cite

External capital flows play a crucial role in driving investment and economic growth in financial resource constrained countries such as Kenya. As such, the vulnerability of a country's foreign direct investment flows to external shocks is a key area of research interest. In the past, studies on Kenya's vulnerability to oil price volatility have focused on its pass-through effects through inflation and the exchange rate. To date, there is a gap in literature with regard to assessment of how oil price volatility impacts foreign direct investment flows into Kenya and this has been premised on Kenya being an oil importing economy. In August 2019, however, Kenya made its first commercial sale of oil in the global market selling 200, 000 barrels and realizing USD 12.0 million (Kes 1.2 billion) in proceeds. The first objective was to establish the trend of global oil price volatility between 1970 and 2016 and to investigate the effect of global oil price volatility FDI inflows in Kenya. The study used GARCH model encompassing Kenya's FDI inflows as the endogenous variable and exchange rate, external balance, inflation, net exports, real interest rate and gross domestic product growth as exogenous variables. The GARCH model entailed estimating two equations, the mean and the variance equations, at the same time with the residuals of the former allowing one to model the volatility of exogenous variables. Multiple linear regression analysis was used to establish strength of linear relationship between the selected macroeconomic variables and FDI inflows in Kenya. The findings of the first objective using ARCH (1, 1) model, yielded a statistically significant coefficient for the lag, 1=1.032, the second objective, the results of multiple linear regression analysis established that only Global Price of Oil (USD per Barrel) 7969894 and External Balance (USD) 0.158033were statistically significant at 5% level. The findings provide important insights for economic policy implementers regarding how to take necessary measures to counter the effect of global oil price volatility in order to realize sustainable inflow of FDI in the country.

show abstract

Estimating the Impact of Financial Investments on Agricultural Futures Prices using Changes in Volatility

Cited by 9 publications

References 37 publications

The Financialization of Coffee, Cocoa and Cotton Value Chains: The Role of Physical Actors

The Financialization of Coffee, Cocoa and Cotton Value Chains: The Role of Physical Actors

Dynamic Impacts of External Uncertainties on the Stability of the Food Supply Chain: Evidence from China

Global Oil Price Volatility and Foreign Direct Investment Inflows in Kenya

Contact Info

Product

Resources

About