Financial Stress and Realized Volatility: The Case of Agricultural Commodities

Matteo Bonato (), Oguzhan Cepni, Rangan Gupta and Christian Pierdzioch
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Matteo Bonato: Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa; IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France

No 202320, Working Papers from University of Pretoria, Department of Economics

Abstract: Given recent debates about the financialization of commodity markets, we analyze the predictive power of financial stress for the realized volatility of agricultural commodity price returns. We estimate realized volatility from high-frequency intra-day data, where the sample period ranges from 2009 to 2020. We study the in-sample and out-of-sample predictability of realized volatility using variants of the popular heterogeneous autoregressive (HAR) model for realized volatility. We analyze the predictive value of financial stress by region of origin and by financial source, and we also control for various realized moments (leverage, realized skewness, realized kurtosis, realized jumps, realized upside tail risk, and realized downside tail risk). We find evidence of in-sample predictive value of financial stress for realized volatility, consistent with the financialialization hypothesis. This in-sample evidence, however, in general does not extend to an out-of-sample forecasting environment.

Keywords: Realized volatility; Agricultural commodities; Financialization; Realized moments; Predictability (search for similar items in EconPapers)
JEL-codes: C22 C53 G41 Q10 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2023-07
New Economics Papers: this item is included in nep-rmg
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Related works:
Journal Article: Financial stress and realized volatility: The case of agricultural commodities (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202320

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