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Correlation structure analysis of the global agricultural futures market

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  • Dai, Yun-Shi
  • Huynh, Ngoc Quang Anh
  • Zheng, Qing-Huan
  • Zhou, Wei-Xing

Abstract

This paper adopts the random matrix theory (RMT) to analyze the correlation structure of the global agricultural futures market from 2000 to 2020. It is found that the distribution of correlation coefficients is asymmetric and right skewed, and many eigenvalues of the correlation matrix deviate from the RMT prediction. The largest eigenvalue reflects a collective market effect common to all agricultural futures, the other largest deviating eigenvalues can be implemented to identify futures groups, and there are modular structures based on regional properties or agricultural commodities among the significant participants of their corresponding eigenvectors. Except for the smallest eigenvalue, other smallest deviating eigenvalues represent the agricultural futures pairs with highest correlations. This paper can be of reference and significance for using agricultural futures to manage risk and optimize asset allocation.

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  • Dai, Yun-Shi & Huynh, Ngoc Quang Anh & Zheng, Qing-Huan & Zhou, Wei-Xing, 2022. "Correlation structure analysis of the global agricultural futures market," Research in International Business and Finance, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:riibaf:v:61:y:2022:i:c:s0275531922000654
    DOI: 10.1016/j.ribaf.2022.101677
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    1. Zhang, Yin-Ting & Zhou, Wei-Xing, 2023. "Quantifying the status of economies in international crop trade networks: A correlation structure analysis of various node-ranking metrics," Chaos, Solitons & Fractals, Elsevier, vol. 172(C).

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    More about this item

    Keywords

    Econophysics; Agricultural futures; Random matrix theory; Correlation matrix;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • P4 - Political Economy and Comparative Economic Systems - - Other Economic Systems
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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