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Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns

Chia-Lin Chang (changchialin@email.nchu.edu.tw), Thanchanok Khamkaew (thanchanok@mju.ac.th), Michael McAleer and Roengchai Tansuchat (roengchaitan@gmail.com)

No 723, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Asia is presently the most important market for the production and consumption of natural rubber. World prices of rubber are not only subject to changes in demand, but also to speculation regarding future markets. Japan and Singapore are the major futures markets for rubber, while Thailand is one of the world's largest producers of rubber. As rubber prices are influenced by external markets, it is important to analyse the relationship between the relevant markets in Thailand, Japan and Singapore. The analysis is conducted using several alternative multivariate GARCH models. The empirical results indicate that the constant conditional correlations arising from the CCC model lie in the low to medium range. The results from the VARMA-GARCH model and the VARMA-AGARCH model suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on conditional volatility. Finally, the DCC model suggests that the conditional correlations can vary dramatically over time. In general, the dynamic conditional correlations in rubber spot and futures returns shocks can be independent or interdependent.

Keywords: Multivariate GARCH; volatility spillovers; conditional correlations; spot returns; futures returns (search for similar items in EconPapers)
JEL-codes: C22 C32 G17 G32 Q14 (search for similar items in EconPapers)
Pages: 19pages
Date: 2010-09
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Modelling conditional correlations in the volatility of Asian rubber spot and futures returns (2011) Downloads
Working Paper: Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns (2010) Downloads
Working Paper: Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns (2009) Downloads
Working Paper: Modelling conditional correlations in the volatility of Asian rubber spot and futures returns (2009) Downloads
Working Paper: Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns (2009) Downloads
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