flexibility and uncertainty the preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk yet it is an important factor in decisions to hold liquid assets or delay irreversible investment this paper formalizes the notion of flexibility in a sequential decision context and relates its value to the amount of information an agent expects to receive a rudimentary money demand model is developed embodying these ideas and the history of flexibility as an economic concept is traced choices are frequently made between alternatives that imply different degrees of future commitment between a short term investment that leaves future options open for example and a long term one that by its very nature forecloses those options the relative attractiveness of the two depends on their probability distributions of payoffs over time a basic consideration in this choice is the recognition that beliefs about the risks governing these payoffs may change current doubts may be partially resolved in the near future this prospect decreases the attractiveness of the longer term commitment in that one is able to respond less fully to new information and even if it does not directly affect the risks associated with shorter term choices enhances their appeal this paper formalizes the above remarks by establishing connections between the following two partial orderings the first is an ordering based on variability of beliefs one set of beliefs is more variable than another if more final risk is resolved at an intermediate stage the more one expects to learn by an intermediate period relative to what one knows today the more variation one is anticipating in beliefs about the final outcome the second is an ordering of current actions or positions based on flexibility one position is more flexible than another if it leaves available a larger set of future positions at any given level of cost these two orderings are incorporated in a simple sequential decision model to suggest the following behavioural principle the more variable are a decision maker s beliefs the more flexible is the position he will choose this principle potentially applies whenever i there will be opportunities to act after further information is received and ii current actions influence either the attractiveness or availability of different future actions

information to guide policy responses to higher global food prices the data and analyses required abstract national decision makers must understand the degree to which their country and population groups within it are exposed to the negative effects of higher global food prices or could exploit new economic opportunities offered by higher prices this paper provides a conceptual overview of the range of data and analyses that will permit leaders and analysts serving them to assess the broad implications of higher global food prices for a country and its population groups what we find is that there are a relatively small number of types of policy responses that governments might take in the face of a food price rise consequently relatively well defined sets of data need to be compiled and types of analyses used by government to generate the information needed to broadly guide efforts to prevent food price increases from becoming crises and to derive any possible benefits international joint action can be employed profitably both to collect this data and to build national capacity to conduct the analyses needed to guide policy formulation and general program design in the face of the risks and the opportunities of higher food prices and to evaluate the effectiveness of those policy responses

period specific volatility spillover based connectedness between oil and other commodity prices and their portfolio implications abstract this paper analyses the changing impact of oil price shocks on a bouquet of metal and agro prices and their implications for investment decisions during different oil price regimes separated by structural breaks endogenously identifying the structural breaks we use network analysis to decipher the nature and extent of such shock transfer across different sub periods we suggest optimal portfolios based on conditional variance estimates to hedge oil shocks during each period this is the first study to analyse the portfolio decisions during specific oil price regimes the results are of significant interest to investors and policy makers

volatility spillovers between oil prices and stock sector returns implications for portfolio management abstract in this article we take a recent generalized var garch approach to examine the extent of volatility transmission between oil and stock markets in europe and the united states at the sector level the empirical model is advantageous in that it typically allows simultaneous shock transmission in the conditional returns and volatilities insofar as volatility transmission across oil and stock sector markets is a crucial element for portfolio designs and risk management we also analyze the optimal weights and hedge ratios for oil stock portfolio holdings with respect to the results our findings point to the existence of significant volatility spillover between oil and sector stock returns however the spillover is usually unidirectional from oil markets to stock markets in europe but bidirectional in the united states our back testing procedures finally suggest that taking the cross market volatility spillovers estimated from the var garch models often leads to diversification benefits and hedging effectiveness better than those of commonly used multivariate volatility models such as the ccc garch of bollerslev 1990 the diagonal bekk garch of engle and kroner 1995 and the dcc garch of engle 2002

analyzing the time frequency lead lag relationship between oil and agricultural commodities abstract we analyze the time frequency co movement of and lead lag relationship between price indices of oil and 21 agricultural commodities and attempt to identify the leader and follower among the considered price indices for the 1980m1 2017m5 period the empirical analysis is conducted using four wavelet tools wavelet coherency phase difference multiple correlation and multiple cross correlation the first two tools are used to identify the time frequency co movement of and lead lag relationship between price indices of oil and 21 agricultural commodities and the third and fourth tools are used to identify the leader and follower among all series of price indices across different scales our results on wavelet coherency show a high degree of co movement at a long run horizon for the entire period between the price indices of oil and coal cotton fishmeal maize rice rubber and wheat furthermore the connection between these commodity markets and the oil market strengthened after 2000 indicating the importance of financial crisis phenomena and geopolitical turbulence additional findings show that short run investors should invest in the beef and swine pork markets as they have very little correlation with the oil markets the results of multiple correlation and multiple cross correlation analysis show that the coffee price was leader or follower across all time scales except wavelet scale 16 where barely was a leader or a follower

on the links between stock and commodity markets volatility this paper investigates the links between price returns for 25 commodities and stocks over the period from january 2001 to november 2011 by paying a particular attention to energy raw materials relying on the dynamic conditional correlation dcc garch methodology we show that the correlations between commodity and stock markets evolve through time and are highly volatile particularly since the 2007 2008 financial crisis the latter has played a key role emphasizing the links between commodity and stock markets and underlining the financialization of commodity markets at the idiosyncratic level a speculation phenomenon is highlighted for oil coffee and cocoa while the safe haven role of gold is evidenced

sit down at the ball game how trade barriers make the world less food secure this paper analyses the impacts of trade policy responses to rising world food prices by carrying out a series of stylised experiments in the wheat market using a world trade model gtap the sequence of events that is modelled comprises a negative wheat supply shock and subsequent implementation of an export tax by a major net exporter and a reduction in import tariffs by a small importer the effects of trade policy responses are contrasted with those of full liberalisation of the wheat market at the core are the opposite effects on producers and consumers as well as the terms of trade and trade tax revenue effects food security is shown to depend crucially on changes in prices but also in incomes that are associated with changes in factor returns the results reveal that major net exporters are generally better off when implementing export taxes for food security purposes large exporting countries export price instability causing world food prices to rise further net importing countries lose out and have limited leeway to reduce tariffs or subsidise imports liberalising wheat trade mitigates rising prices and contributes to food security but to the detriment of production in africa and asia making them more dependent on and vulnerable to changes in the world market concerted action at the wto forum is required notably clarifying and sharpening the rules regarding export measures

business cycle comovement in the g 7 common shocks or common transmission mechanisms what are the sources of macroeconomic comovement among g 7 countries two main candidate explanations may be singled out common shocks and common transmission mechanisms in the article it is shown that they are complementary rather than alternative explanations by means of a large scale factor vector autoregressive fvar model allowing for full economic and statistical identification of all global and idiosyncratic shocks it is found that both common disturbances and common transmission mechanisms of global and country specific shocks account for business cycle comovement in the g 7 countries moreover spillover effects of foreign idiosyncratic disturbances seem to be a less important factor than the common transmission of global or domestic shocks in the determination of international macro economic comovements

food oil volatility spillovers and the impact of distinct biofuel policies on price uncertainties on feedstock markets over recent decades the link between crude oil and agricultural markets has been reinforced following the introduction of biofuels we use timely measures of co variation spillovers to analyze the role of crude oil in shaping price uncertainties of agricultural commodities which are largely used as biofuel feedstocks our sectoral and market specific measures distinguish tranquil 1995 2005 and crisis episodes 2006 2015 as well as periods during which either consumption mandates or tax credits were enacted to spur biofuels during the crisis period crude oil volatility transmissions account for 16 20 of price uncertainties in ethanol biodiesel feedstock markets on average moreover we find evidence of enhanced volatility transmissions under tax credit regimes compared with consumption mandates the results from pooled regressions confirm stronger volatility transmissions by about 12 under the enactment of tax credits

do energy prices stimulate food price volatility examining volatility transmission between us oil ethanol and corn markets this paper examines volatility transmission in oil ethanol and corn prices in the united states between 1997 and 2011 we follow a multivariate garch approach to evaluate the level of interdependence and the dynamics of volatility across these markets preliminary results indicate a higher interaction between ethanol and corn markets in recent years particularly after 2006 we only observe however significant volatility spillovers from corn to ethanol prices but not the converse we also do not find major cross volatility effects from oil to corn markets the results do not provide evidence of volatility in energy markets stimulating price volatility in grain markets

a lagrange multiplier test for causality in variance we adapt the lagrange multiplier lm principle to test for noncausality in variance of financial returns the new test is compared with a portmanteau statistic cheung y w ng l k 1996 a causality in variance test and its application to financial market prices journal of econometrics 72 33 48 a monte carlo study reveals superior power of the lm test

opec news announcements effects on oil price expectation and volatility abstract several times a year opec hosts conferences among its members to agree on further oil production policies prior to opec conferences there is usually rampant speculation about which decision concerning world oil production levels no change increase or cut will be announced the purpose of our investigation is to assess the impact of opec announcements on expectation and volatility of daily oil price changes returns we modify dummy variables indicating the day of an opec announcement to reflect a certain pattern of impact on return expectation and volatility a combination of regression and garch models can then differentiate between pre and post announcement effects and distinguish between the three kinds of opec decisions we find evidence for a post announcement effect on expectation which is negative in the case of a cut decision and positive in case of an increase or maintain decision while there is a positive pre announcement effect on volatility which is strongest in the case of a cut decision

dependence risk analysis in energy agricultural and precious metals commodities a pair vine copula approach we apply pair vine copulas specifically the c vine and r vine copulas to examine the conditional multivariate dependence pattern structure and r vine copula based value at risk var to assess fi

forecasting oil prices high frequency financial data are indeed useful abstract the paper examines the importance of combining high frequency financial information along with the oil market fundamentals in order to gain incremental forecasting accuracy for oil prices inspired by french et al 1987 and bollerslev et al 1988 who maintain that future asset returns are also influenced by past volatility we use daily volatilities and returns from financial and commodity markets to generate real out of sample forecasts for the monthly oil futures prices our results convincingly show that although the oil market fundamentals are useful for long run forecasting horizons the combination of the latter with high frequency financial data significantly improve oil price forecasts by reducing the rmse of the no change forecast by approximately 68 results are even more impressive during the oil price collapse period of 2014 15 these findings suggest that we cannot ignore the information extracted from the financial markets when forecasting oil prices our results are both statistically and economically significant as suggested by several robustness tests

oil prices and real estate investment trusts reits gradual shift causality and volatility transmission analysis abstract according to literature oil price shocks and volatility can have sector specific impacts in the market while these studies include most asset groups the dynamic relationship between the oil market and real estate investment trusts reits has not been tested this study examines the role of oil price shocks and volatility on six reit categories residential hotel healthcare retail mortgage and warehouse industrial reits for the january 2005 december 2013 period in addition a new causality approach is proposed by augmenting the toda yamamoto method with a fourier approximation this approach is capable of capturing gradual or smooth shifts and does not require a prior knowledge regarding the number dates and form of structural breaks the so called fourier toda yamamoto causality mean spillover test finds uni directional causality running from oil prices to all reits except for the mortgage reits in the latter case the causality is reversed in addition the relatively new and simple causality in variance test shows that there is bi directional volatility transmission between the oil market and all reits our results have important implications for reit managers and investors

do food and oil prices co move abstract this paper studies co movements between world oil prices and global prices for corn soybean and wheat using copulas several copula models with different conditional dependence structures and time varying dependence parameters were considered empirical results for weekly data from january 1998 to april 2011 showed weak oil food dependence and no extreme market dependence between oil and food prices these results support the neutrality of agricultural commodity markets to the effects of changes in oil prices and non contagion between the crude oil and agricultural markets however dependence increased significantly in the last three years of the sampling period even though upper tail dependence remained insignificant indicating that food price spikes are not caused by positive extreme oil price changes these results have implications for policy design risk management and hedging strategies

asymmetric adjustments in the ethanol and grains markets this paper examines the long and short run asymmetric adjustments and pairs trades for nine pairs of spot and futures prices itemized as three own pairs for three different bio fuel ethanol types three own pairs for three related agricultural products namely corn soybeans and sugar and three cross pairs that included hybrids of the spot price of each of the agricultural products and an ethanol futures price most of the spreads asymmetric adjustments generally occur during narrowing the three ethanol pairs that contain the ecbot futures with each of chicago spot new york harbor spot and western european rotterdam spot show different long run adjustments arbitrage profitable opportunities and price risk hedging capabilities the asymmetric spread adjustments for the three grains are also different with corn spread showing the strongest long run widening adjustment and sugar showing the weakest narrowing adjustment among others the empirical analysis indicates the importance of potentially hedging the spot prices of agricultural commodities with ethanol futures contracts which sends an important message that the ethanol futures market is capable of hedging price risk in agricultural commodity markets the short run asymmetric adjustments for individual prices in the nine pairs with the exception of the corn own pair underscore the importance of futures prices in the price discovery and hedging potential particularly for ethanol futures

volatility spillovers in china s crude oil corn and fuel ethanol markets price volatility spillovers among china s crude oil corn and fuel ethanol markets are analyzed based on weekly price data from september 5 2003 to august 31 2012 employing the univariate egarch model and the bekk mvgarch model respectively the empirical results indicate a higher interaction among crude oil corn and fuel ethanol markets after september 2008 in the overall sample period the results simultaneously provide strong evidence that there exist unidirectional spillover effects from the crude oil market to the corn and fuel ethanol markets and double directional spillovers between the corn market and the fuel ethanol market however the spillover effects from the corn and fuel ethanol markets to the crude oil market are not significant

commodity price inflation retail pass through and market power abstract when commodity prices rise wholesalers and retailers of products derived from basic commodities respond by passing along at least a portion of the price increase to consumers in this paper we examine whether firms respond differently to positive commodity price shocks than to negative commodity price shocks that is whether commodity price volatility alters market power we exploit recent volatility in food commodity prices over the period 2007 2010 to investigate how commodity price shocks translate into market power in two different vertically structured food product industries potatoes and fluid milk for potatoes we find both wholesale and retail market power decreases increases during periods of rising falling commodity prices moreover price cost margins widen a substantially greater degree in response to negative shocks than margins narrow in response to positive shocks indicating that commodity price volatility increases market power for fluid milk we find that market power likewise declines during periods of rising commodity prices however market power does not significantly change during periods of falling commodity prices suggesting that commodity price volatility decreases market power

time frequency causality and connectedness between international prices of energy food industry agriculture and metals abstract this study analyzes the lead lag relationship between the price indices of energy fuels and each of food industrial inputs agriculture raw materials metals and beverages in the time frequency domain to this end we first use the wavelet coherency and phase differences next we use the diebold and yilmaz 2012 and barunik and krehlik 2017 spillover indices to analyse the connectedness among the set of the price indices under consideration the period of the study is 1990m1 to 2017m5 the wavelet coherency results reveal that there are important and significant relations between the fuel and food prices the fuel and industrial prices and the fuel and metal prices these results also show that there are phase relationships between those paired prices the volatility spillover results indicate that the agricultural sector is the most affected by shocks from the other markets the return series of the industrial input prices at all frequencies appears to be the main source of volatility transmission to the prices of the other commodities over the whole period this finding underlines the relevance of the industrial inputs to policy makers particularly when they design policies to provide incentives related to industrial production

volatility spillovers between food and energy markets a semiparametric approach previous literature on volatility links between food and energy prices is scarce and mainly based on parametric approaches this article examines these links by using a semiparametric garch model recently proposed by long et al 2011 which is essentially a nonparametric correction of the parametric conditional covariance function the analysis focuses on price links between crude oil ethanol and sugar prices in brazil results suggest strong volatility links between the prices studied parametric approximations of the conditional covariance matrix may lead to misleading results that can be improved upon by using nonparametric techniques

food versus fuel what do prices tell us abstract sorting out the impacts of biofuels on global agricultural commodity prices is impossible without turning to data and distinguishing between the short run versus the long run impacts using time series prices on fuels and agricultural commodities the aim is to investigate the long run cointegration of these prices simultaneously with their multivariate short run interactions results indicate no direct long run price relations between fuel and agricultural commodity prices and limited if any direct short run relationships in terms of short run price movements sugar prices are influencing all the other agricultural commodity prices except rice with sugar the number one world input for ethanol results indicate increased ethanol production is potentially influencing short run agricultural commodity prices overall results support the effect of agricultural commodity prices as market signals which restore commodity markets to their equilibria after a demand or supply event shock

how is volatility in commodity markets linked to oil price shocks abstract this study investigates the effects of oil price shocks on volatility of agricultural and metal commodities we decompose an oil price shock to its underlying components including macroeconomics and oil specific shocks the applied method is the structural vector autoregressive svar model and the time span is from april 1983 to may 2014 the investigation is divided into two subsamples before and after may 2006 for agriculture taking into account the 2006 2008 food crisis and change in u s ethanol production policy and before and after january 2008 for metals considering the recent global financial crisis we find that based on impulse response functions the response of volatility of each commodity to an oil price shock differs significantly depending on the underlying cause of the shock for the both periods moreover according to variance decomposition the explanatory power of oil shocks becomes stronger after the crisis the different responses of commodities are described in detail by investigating market characteristics in each period

world oil and agricultural commodity prices evidence from nonlinear causality abstract the increasing co movements between the world oil and agricultural commodity prices have renewed interest in determining price transmission from oil prices to those of agricultural commodities this study extends the literature on the oil agricultural commodity prices nexus which particularly concentrates on nonlinear causal relationships between the world oil and three key agricultural commodity prices corn soybeans and wheat to this end the linear causality approach of toda yamamoto and the nonparametric causality method of diks panchenko are applied to the weekly data spanning from 1994 to 2010 the linear causality analysis indicates that the oil prices and the agricultural commodity prices do not influence each other which supports evidence on the neutrality hypothesis in contrast the nonlinear causality analysis shows that i there are nonlinear feedbacks between the oil and the agricultural prices and ii there is a persistent unidirectional nonlinear causality running from the oil prices to the corn and to the soybeans prices the findings from the nonlinear causality analysis therefore provide clues for better understanding the recent dynamics of the agricultural commodity prices and some policy implications for policy makers farmers and global investors this study also suggests the directions for future studies

oil price agricultural commodity prices and the dollar a panel cointegration and causality analysis abstract this study examines the dynamic relationship between world oil prices and twenty four world agricultural commodity prices accounting for changes in the relative strength of us dollar in a panel setting we employ panel cointegration and granger causality methods for a panel of twenty four agricultural products based on monthly prices ranging from january 1980 to february 2010 the empirical results provide strong evidence on the impact of world oil price changes on agricultural commodity prices contrary to the findings of many studies in the literature that report neutrality of agricultural prices to oil price changes we find strong support for the role of world oil prices on prices of several agricultural commodities the positive impact of a weak dollar on agricultural prices is also confirmed

speculation and volatility spillover in the crude oil and agricultural commodity markets a bayesian analysis this paper assesses factors that potentially influence the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets stochastic volatility models are applied to weekly crude oil corn and wheat futures prices from november 1998 to january 2009 model parameters are estimated using bayesian markov chain monte carlo methods speculation scalping and petroleum inventories are found to be important in explaining the volatility of crude oil prices several properties of crude oil price dynamics are established including mean reversion an asymmetry between returns and volatility volatility clustering and infrequent compound jumps we find evidence of volatility spillover among crude oil corn and wheat markets after the fall of 2006 this can be largely explained by tightened interdependence between crude oil and these commodity markets induced by ethanol production

risk spillover between energy and agricultural commodity markets a dependence switching covar copula model abstract unlike previous studies we employ a relatively newer modelling technique a time varying copula with a switching dependence to characterise the conditional dependence between energy and agricultural commodity markets in a more realistic way because the dependence may switch between positive and negative correlation regimes over time a dependence switching copula more appropriately and realistically captures a dependence structure than a single copula regime our findings indicate that the lower tail dependence is much stronger in a bearish regime than in a bullish regime highlighting the importance of systematic risk spillovers during extreme downward movements furthermore the significant risk spillovers from energy to agricultural commodities are verified by measuring the conditional value at risk covar and delta covar finally some useful implications are summarized for investors portfolios and risk avoidance

volatility spillover between oil and agricultural commodity markets abstract this study examines volatility transmission between oil and selected agricultural commodity prices wheat corn soybeans and sugar we apply the newly developed causality in variance test and impulse response functions to daily data from 01 january 1986 to 21 march 2011 in order to identify the impact of the food price crisis the data are divided into two sub periods the pre crisis period 01 january 1986 to 31 december 2005 and the post crisis period 01 january 2006 21 march 2011 the variance causality test shows that while there is no risk transmission between oil and agricultural commodity markets in the pre crisis period oil market volatility spills on the agricultural markets with the exception of sugar in the post crisis period the impulse response analysis also indicates that a shock to oil price volatility is transmitted to agricultural markets only in the post crisis period this paper thereby shows that the dynamics of volatility transmission changes significantly following the food price crisis after the crisis risk transmission emerges as another dimension of the dynamic interrelationships between energy and agricultural markets

world oil prices and agricultural commodity prices evidence from an emerging market abstract oil prices are thought to have direct effect on agricultural prices followed by an indirect effect through the exchange rate this paper examines the short and long run interdependence between world oil prices lira dollar exchange rate and individual agricultural commodity prices wheat maize cotton soybeans and sunflower in turkey to this end the toda yamamoto causality approach and generalized impulse response analysis for identification of the long and short run interrelationships are applied to the monthly data spanning from january 1994 to march 2010 the impulse response analysis suggests the turkish agricultural prices do not significantly react to oil price and exchange rate shocks in the short run the long run causality analysis reveals that the changes in oil prices and appreciation depreciation of the turkish lira are not transmitted to agricultural commodity prices in turkey hence our results support neutrality of agricultural commodity markets in turkey to both direct and indirect effects of oil price changes

fossil fuel price uncertainty and feedstock edible oil prices evidence from mgarch m and virf analysis abstract this paper focuses on examining the impact of crude oil price volatility on the price changes of major edible oils rapeseed soybean and sunflower which are the main feedstock for the biodiesel industry in the european union for this purpose a four variate version of non diagonal garch in mean model that allows for asymmetry in the variance covariance matrix is used an important conclusion that emerges from this study is that the crude oil price uncertainty appears to be responsible for a significant decline in price returns of major feedstock edible oils considered in this study the volatility impulse response analyses support the conclusion that the conditional variances of both edible and crude oil and covariances between them are generally highly responsive to historical shock however the size of the impacts is mainly commodity specific finally we investigate the causality from crude oil price volatility to edible oil prices and the effects of oil price shocks on edible oil prices by using the granger causality test and generalized impulse response function analysis respectively the empirical results show that there is strong evidence of causality from crude oil price volatility to all edible oil prices under study and generalized impulse response analysis shows that the edible oil markets significantly respond to the shocks in oil prices

dynamic spillovers among major energy and cereal commodity prices abstract over the past decade the sharp increases in the prices of oil and agricultural commodities have raised serious concerns about the heightened volatility of these markets and the possible negative interactions between them this article deals with the dynamic return and volatility spillovers across international energy and cereal commodity markets it also examines the impacts of three types of opec news announcements on the volatility spillovers and persistence in these markets for this purpose we make use of the var bekk garch and var dcc garch models for the daily spot prices of eight major commodities including wti oil europe brent oil gasoline heating oil barley corn sorghum and wheat our results provide evidence of significant linkages between these energy and cereal markets moreover the opec news announcements are found to exert influence on the oil markets as well as on the oil cereal relationships finally we show that the persistence of volatility decreases increases for the crude oil and heating oil gasoline returns after accounting for the opec announcements in these multivariate garch models however the results are more mixed for the cereal markets overall our results can be used to improve the risk adjusted performance by having more diversified portfolios and also serve to hedge the oil risk more effectively