Price volatility in ethanol markets

Teresa Serra and David Zilberman ()

No 49188, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: Our paper looks at how price volatility in the Brazilian ethanol industry changes over time and across markets by using a new methodological approach suggested by Seo (2007). The main advantage of Seo’s proposal over previously existing methods is that it allows to jointly estimate the cointegration relationship between the price series investigated and the multivariate GARCH process. Our results suggest that crude oil prices not only influence ethanol price levels, but also their volatility. Increased volatility in crude oil markets results in increased volatility in ethanol markets. Ethanol prices, on the other hand, influence sugar price levels and an increase in their volatility levels also impacts, though less strongly, on sugar markets.

Keywords: volatility; ethanol; GARCH; cointegration; Demand and Price Analysis; Resource /Energy Economics and Policy; Risk and Uncertainty; Q11; C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:ags:aaea09:49188

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