Commodity market risk from 1995 to 2013: an extreme value theory approach

Torun Fretheim and Glenn Kristiansen

Applied Economics, 2015, vol. 47, issue 26, 2768-2782

Abstract: In this article we examine whether extreme risk has increased in the agricultural commodity market during the period 1995-2013. We add to the literature on food price volatility by analysing the tail segment of futures price return distributions. Food price variability is a concern for governments and regulators worldwide, as most nations trade in food. High food price variability can contribute to poverty and malnourishment, in particular for people in less economically developed economies. We find no indications of systematically increasing tail-risk for the commodities in our sample. Analysis of estimated shape-parameters of the Generalized Extreme Value distribution further supports the conclusion that there is no general systematic change in the extreme risk associated with these commodity investments.

Date: 2015
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DOI: 10.1080/00036846.2015.1011307

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