A cointegration analysis of agricultural,energy and bio-fuel spot,and futures prices |
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| Authors: | David E Allen Michael McAleer Abhay K Singh |
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| Institution: | 1. School of Mathematics and Statistics, University of Sydney, Sydney, Australia;2. Center for Applied Financial Studies, University of South Australia, Adelaide, Australia;3. School of Business and Law, Edith Cowan University, Joondalup, Australia;4. Department of Quantitative Finance, National Tsing Hua University, Hsinchu, Taiwan;5. Discipline of Business Analytics, University of Sydney Business School, Sydney, Australia;6. Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands;7. Department of Quantitative Economics, Complutense University of Madrid, Spain;8. Institute of Advanced Sciences Yokohama National University, Yokohama, Japan;9. School of Business and Law, Edith Cowan University, Joondalup, Australia |
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| Abstract: | This article features an analysis of the cointegration relationships among agricultural commodity, ethanol and Cushing crude oil spot, and future prices. The use of grains for the creation of bio-fuels has sparked fears that these demands are inflating food prices. We analyse approximately 10 years of daily spot and futures prices for corn, wheat, sugar ethanol, and oil prices from Datastream for the period 19 July 2006 to 2 July 2015. The analysis features Engle-Granger pairwise cointegration and partial cointegration. Pairs of series, that are cointegrated, are analysed using Markov-switching VECM and Impulse Response Analysis, which confirms that these markets have significant linkages that vary according to whether they are in low or high volatility regimes. |
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| Keywords: | Bio fuels time series cointegration partial cointegration Markov-switching VECM impulse responses Volatility |
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