Modelling conditional correlations in the volatility of Asian rubber spot and futures returns
AbstractAsia is presently the most important market for the production and consumption of natural rubber. World prices of rubber are not only subject to changes in demand, but also to speculation regarding future markets. Japan and Singapore are the major futures markets for rubber, while Thailand is one of the worldâ€™s largest producers of rubber. As rubber prices are influenced by external markets, it is important to analyse the relationship between the relevant markets in Thailand, Japan and Singapore. The analysis is conducted using several alternative multivariate GARCH models. The empirical results indicate that the constant conditional correlations arising from the CCC model of Bollerslev (1990) lie in the low to medium range. The results from the VARMA-GARCH model of Ling and McAleer (2003) and the VARMA-AGARCH model of McAleer et al. (2009) suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on conditional volatility. Finally, the DCC model of Engle (2002) suggests that the conditional correlations can vary dramatically over time. In general, the dynamic conditional correlations in rubber spot and futures returns shocks can be independent or interdependent.
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Bibliographic InfoPaper provided by Erasmus University Rotterdam, Econometric Institute in its series Econometric Institute Report with number EI 2009-34.
Date of creation: 23 Nov 2009
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conditional correlations; multivariate GARCH; volatility spillovers; futures returns; spot returns; Asian rubber prices;
Other versions of this item:
- Tanchanok Khamkaew & Roengchai Tansuchat & Chia-Lin Chang & Michael McAleer, 2009. "Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns," CARF F-Series CARF-F-175, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Nov 2009.
- Chia-Lin Chang & Thanchanok Khamkaew & Michael McAleer & Roengchai Tansuchat, 2010. "Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns," Working Papers in Economics 10/38, University of Canterbury, Department of Economics and Finance.
- Chia-Lin Chang & Thanchanok Khamkaew & Michael McAleer & Roengchai Tansuchat, 2010. "Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns," KIER Working Papers 723, Kyoto University, Institute of Economic Research.
- Tanchanok Khamkaew & Roengchai Tansuchat & Chia-Lin Chang & Michael McAleer, 2009. "Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns," CIRJE F-Series CIRJE-F-675, CIRJE, Faculty of Economics, University of Tokyo.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
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