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MODELING THE DYNAMICS OF INTERNATIONAL AGRICULTURAL COMMODITY PRICES: A COMPARISON OF GARCH AND STOCHASTIC VOLATILITY MODELS

Lu Yang () and Shigeyuki Hamori ()

Annals of Financial Economics (AFE), 2018, vol. 13, issue 03, 1-20

Abstract: In this study, we employ generalized autoregressive conditional heteroscedastic (GARCH) and stochastic volatility models to investigate the dynamics of wheat, corn, and soybean prices. We find that the stochastic volatility model provides the highest persistence of the volatility estimation in all cases. In addition, based on the monthly data, we find that the jump process and asymmetric effect do not exist in agricultural commodity prices. Finally, by estimating Value at risk (VaR) for these agricultural commodities, we find that the upsurge in agricultural prices in 2008 may have been caused by financialization.

Keywords: GARCH model; stochastic volatility; financialization; value at risk; agricultural commodities (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S2010495218500100

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