Long‐run and Short‐run Co‐movements in Energy Prices and the Prices of Agricultural Feedstocks for Biofuel

Myers, Robert J.; Johnson, Stanley R.; Helmar, Michael D.; Baumes, Harry S.

doi:10.1093/ajae/aau003

Cited by 76 publications

(35 citation statements)

References 31 publications

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“…In terms of elasticity if there is 1 percent increase in ethanol price, gasoline price will increase by 1.99 percent. Zhang et al (2010) and Myers et al (2014) found a similar result.…”

Section: Resultssupporting

confidence: 61%

Relationship among Energy, Bioenergy, and Agricultural Commodity Prices: Re-Considering Structural Changes

Nemati

2016

SSRN Journal

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This study investigates the relationships among the prices of gasoline, ethanol, and agricultural products that includes soybeans and corn. By increasing production of ethanol using corn, concerns about emerging new relationship between agricultural products price and energy price increased. The result indicates that, without considering structural breaks, there is no long-run relationship between energy and agricultural products prices. However, after consideration of structural breaks not only, long-run relationship between energy and agricultural products exist, but also this relationship intensified during last decade. Also, energy price can be transmitted to agricultural products prices from the indirect and direct channel.

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“…In terms of elasticity if there is 1 percent increase in ethanol price, gasoline price will increase by 1.99 percent. Zhang et al (2010) and Myers et al (2014) found a similar result.…”

Section: Resultssupporting

confidence: 61%

Relationship among Energy, Bioenergy, and Agricultural Commodity Prices: Re-Considering Structural Changes

Nemati

2016

SSRN Journal

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“…A rich literature supports the usage of Dynamic Conditional Correlation (DCC) coefficients to account for short run timevarying co-movement due to its capability to consider heteroskedasticity while modelling conditional correlation coefficients. According to Myers et al (2014), in the short run, variables are found to be stationary and therefore provide an efficient measure of short run time-varying co-movement. So, if two variables are driven by common cyclical events, then the correlation shall be equivalent to one otherwise less than one.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Cross country co-movement in equity markets after the US financial crisis

Singh

2016

JIBR

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Purpose This paper aims to attempt to capture the co-movement of the Indian equity market with some of the major economic giants such as the USA, Europe, Japan and China after the occurrence of global financial crisis in a multivariate framework. Apart from these cross-country co-movements, the study also captures an intertemporal risk-return relationship in the Indian equity market, considering the covariance of the Indian equity market with the other countries as well. Design/methodology/approach To account for dynamic correlation coefficients and risk-return dynamics, vector autoregressive (1) dynamic conditional correlation–asymmetric generalized autoregressive conditional heteroskedastic model in a multivariate framework and exponential generalized autoregressive conditional heteroskedastic model in mean with covariances as explanatory variables are used. For an in-depth analysis, Markov regime switching model and optimal hedging ratios and weights are also computed. The span of data ranges from August 10, 2010 to August 7, 2015, especially after the global financial crisis. Findings The Indian equity market is not completely decoupled from mature markets as well as emerging market (China), but the time-varying correlation coefficients are on a downward spree after the global financial crisis, except for the US market. The Indian and Chinese equity markets witness a highest level of correlation with each other, followed by the European, US and Japanese markets. Both the optimal portfolio hedge ratios and portfolio weights with two asset classes point out toward portfolio risk minimization through the combination of the Indian and US equity market stocks from a US investor viewpoint. A negative co-movement between the Indian and US market increases the conditional expected returns in the Indian equity market. There is an insignificant but a negative relationship between the expected risk and returns. Practical implications The study provides an insight to the international as well as domestic investors and supports the construction of cross-country portfolios and risk management especially after the occurrence of global financial crisis. Originality/value The present study contributes to the literature in three senses. First, the period relates to the events after the global financial crisis (2007-2009). Second, the study examines the co-movement of the Indian equity market with four major economic giants such as the USA, Europe, Japan and China in a multivariate framework. These economic giants are excessively following the easy money policies aftermath the financial crisis so as to wriggle out of deflationary phases. Finally, the study captures risk-return relationship in the Indian equity market, considering its covariance with the international markets.

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“…Williams and Wright, 1991;Deaton and Laroque, 1992) while a large volume of empirical studies have broadly concluded that shocks to commodity prices are permanent (e.g. Myers et al, 2014;Gutierrez et al, 2015;Baffes and Haniotis, 2016;Dillon and Barrett, 2016). The crucial question is how can we reconcile this contradiction between theory and empirics?…”

Section: Introductionmentioning

confidence: 99%

Are Shocks Transitory or Permanent? An Inquiry into Agricultural Commodity Prices

Ghoshray¹

2018

J Agricultural Economics

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This paper contributes to the contentious topic of whether shocks to agricultural commodity prices are permanent or transitory. This is an important issue with regards to forecasting, economic modelling of agricultural prices and risk management. Past studies have not accounted for important characteristics of agricultural prices that matter when testing whether shocks to prices are permanent or transitory. These include the presence or absence of a deterministic trend, the possible break in the trend, non‐stationary volatility, and the problem of the initial deviation of commodity prices from their long‐run mean or trend. We conduct a comprehensive test that incorporates all these characteristics known to plague agricultural commodity prices. Though the conclusion is mixed, the balance is in favour of agricultural price shocks being permanent in nature. This result departs from the general view that in theory, agricultural prices should be stationary, suggesting that the controversy of whether shocks to agricultural prices are temporary or permanent is not yet over.

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Long‐run and Short‐run Co‐movements in Energy Prices and the Prices of Agricultural Feedstocks for Biofuel

Cited by 76 publications

References 31 publications

Relationship among Energy, Bioenergy, and Agricultural Commodity Prices: Re-Considering Structural Changes

Relationship among Energy, Bioenergy, and Agricultural Commodity Prices: Re-Considering Structural Changes

Cross country co-movement in equity markets after the US financial crisis

Are Shocks Transitory or Permanent? An Inquiry into Agricultural Commodity Prices

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