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Conditional tail price risk spillovers in coffee markets across quality, physical space, and time: Empirical analysis with penalized quantile regressions

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  • Fousekis, Panos
  • Grigoriadis, Vasilis

Abstract

Transmission of price shocks among related markets is a necessary condition for economic efficiency. Earlier empirical studies have investigated price spillovers in green coffee markets across physical space, quality space, and/or time through highly restrictive models. The present work examines price transmission “at the extremes” using penalized quantile regressions, an econometric tool that allows one to analyze complex market networks. The analysis relies on daily green coffee prices from two geographically separated markets (USA and EU), four coffee varieties, and two futures markets. The empirical results suggest: (a) price risk spillovers are stronger when quality differentiation is low and when green coffee varieties are traded within the same spatial market; (b) higher quality varieties are net-transmitters of price risk to lower quality ones while futures markets are net-receivers of price risk from spot markets; and (c) asymmetric price spillovers are more likely to occur for coffee beans traded in different spatial markets.

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  • Fousekis, Panos & Grigoriadis, Vasilis, 2022. "Conditional tail price risk spillovers in coffee markets across quality, physical space, and time: Empirical analysis with penalized quantile regressions," Economic Modelling, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:ecmode:v:106:y:2022:i:c:s0264999321002807
    DOI: 10.1016/j.econmod.2021.105691
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    More about this item

    Keywords

    Coffee; Risk spillovers; Market network; Asymmetry;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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