Time-varying dependence structure between oil and agricultural commodity markets: A dependence-switching CoVaR copula approach

Satish Kumar, Aviral Tiwari, Ibrahim Raheem and Erik Hille

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the energy-food nexus using the dependence-switching copula model. Specifically, we look at the dependence for four distinct market states, such as, increasing oil–increasing commodity, declining oil–declining commodity, increasing oil–declining commodity, as well as declining oil–increasing commodity markets. Our results support the argument that the crash of oil markets and agricultural commodities happen at the same time, especially during crisis period. However, the same is not true during times of normal economic conditions, implying that investors cannot make excess profits in both agricultural and oil markets at once. Furthermore, our analysis suggests that the return chasing effect dominates for all commodities on maximum occasions. The CoVaR and ∆CoVaR results indicate important risk spillover from oil to agricultural markets, especially around the financial crisis.

Keywords: Agricultural commodities; Oil; CoVaR; Dependence-switching copula; Tail dependence. (search for similar items in EconPapers)
JEL-codes: C58 C63 G11 Q1 Q4 (search for similar items in EconPapers)
Date: 2021-03-12
New Economics Papers: this item is included in nep-agr and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Journal Article: Time-varying dependence structure between oil and agricultural commodity markets: A dependence-switching CoVaR copula approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:106684

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