The impact of natural disaster risk on the return of agricultural futures |
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| Institution: | 1. School of Finance, Nanjing University of Finance and Economics, Nanjing, China;2. School of Economics, Fudan University, Shanghai, China;3. Yanqi Lake Beijing Institute of Mathematical Sciences and Applications, Beijing, China;4. Department of Finance and Legal Studies, University of Missouri - St. Louis, St. Louis, USA;5. School of Accounting, Nanjing University of Finance and Economics, Nanjing, China |
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| Abstract: | This paper constructs a natural disaster risk index based on natural disaster keywords from news media that can reflect weather, crop diseases, epidemics, and other threats to agricultural prices in China. We then examine the response of agricultural futures returns to the change in natural disaster risk. We find that natural disaster risk has a significant positive impact on soybean, wheat, corn, and sugar futures returns during normal and bullish market conditions. We further investigate the moderating effect of policy intervention and show that the marginal effect of natural disaster risk on soybean futures returns (but not other agricultural futures) is influenced by policy intervention. These results indicate that the adjustment of natural disaster risk assessment will benefit portfolio management. |
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| Keywords: | Natural disaster risk Agricultural futures Quantile regression |
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